Costing Non-linearities, Surprises, and Irreversible Events

The primary purpose of this paper is to highlight issues that are crucial when costing climatic impacts, particularly when the possibility is allowed for non-linearities, surprises, and irreversible events. The assumptions made when carrying out such exercises largely explain why different authors obtain different policy conclusions. Uncertainties become more significant when projections of climatic impacts are considered. There is uncertainty about how the biosphere will respond to human-induced climate change. However, it is clear that life, biogeochemical cycles, and climate are linked components of a highly interactive system. Non-linearities and the likelihood of rapid, unanticipated events (surprises) require that costing methods use a wide range of estimates for key parameters or structural formulations, and that, when possible, results be cast in probabilistic terms rather than central tendencies since the latter mask the policy-relevant wide range of potential results such a diversity of approaches implies. Costs need also to be presented in more numeraires than just monetary ones. This paper recommends that key for authors of scientific assessments is transparency of assumptions and the use of as wide a range of eventualities (and their attendant probabilities) as possible to help decision makers become aware of the arguments for flexibility of policy options. S H Schneider, K Kuntz-Duriseti, C Azar 82 Valuing climate change under uncertainty The combination of increasing population and per capita energy consumption will contribute to increasing CO2 (carbon dioxide) and sulphate emissions over the 21 sl century, but projections of the extent of their increase are uncertain. According to IPCC (Inter Governmental Panel on Climatic Change) (1996a), CO2 concentration will double preindustrial levels by the middle of the 21 Sl century, which is projected to lead to a warming of 1 DC to more than 5 DC by the end of the 21 sl century. Warming of 1 DC could have significant implications for species adaptation, whereas warming of 5 DC or more could have catastrophic effects on natural and human ecosystems, including serious coastal flooding. The overall annual cost of these impacts in smarket sectors' of the economy could run into tens of billions of dollars (Smith and Tirpak 1990, IPCC 1996b). Although fossil fuel use contributes substantially to such impacts, associated costs are rarely included in the price of conventional fuels; they are externalized. Internalizing these environmental externalities (Nordhaus 1992, IPCC 1996c, Goulder and Kennedy 1997) is a principal goal of international climate policy analyses. Uncertainties become more significant when projectio~s of climatic impacts are considered. The extent of the humap imprints on the environment is unprecedented: human-induced climate change is projected to occur at a rapid rate, natural habitat is fragmented for agriculture, settlements, and other development activities, 'exotic' species are imported across natural biogeographic barriers, and the environment is assaulted by chemical agents (Root and Schneider 1993). It is, therefore, essential to understand not only how much climate change is likely, but also how to characterize and analyze the value of the ecosystem services that might be disrupted. There is uncertainty about how the biosphere will respond to human-induced climate change. However, Pacific and Asian Journal it is clear that life, biogeochemical cycles, and climate are linked components of a highly interactive system. The primary purpose of this paper is to highlight issues that are crucial when costing climatic impacts, particularly when the possibility is allowed for non-linearities, surprises, and irreversible events. The assumptions made when carrying out such exercises largely explain why different authors obtain different policy conclusions. The overall cost of climate change involves the costs of mitigation, adaptation, and the remaining damages. Uncertainty and the possibility of surprises surround each of these components and have a profound effect on them. In this paper, first, we discuss the conditions for non-linear events and surprises, followed by their importance for the costing of climate damages. Finally, we consider various response strategies, including adaptation and mitigation. Imaginable conditions for surprise J Rate of forcing The most comprehensive models of a complicated coupled system like an ESM (earth system model) are likely to have unanticipated results when forced to change rapidly by external disturbances like CO2 and aerosols. Indeed, some of the transient coupled atmosphereocean models run out for hundreds of years exhibit dramatic change to the basic climate state-radical change in global ocean currents (Mana be and Stouffer 1993, Haywood, Stouffer, Wetherald, et al. 1997, Rahmstorf 1999). Stocker and Schmittner (1997) argue that rapid alterations to oceanic currents could be induced by faster forcing rates. Thompson and Schneider (1982) used simplified transient models to investigate whether the time evolving patterns of climate change might depend on the rate at which CO2 concentrations increase. For slowly increasing CO~ build-up scenarios, the model predicts the of Energy 10(1): 81-106 83 Costing non-linearities, surprises, and irreversible events standard outcome: the increase in temperature at the poles is more than that in the tropics. Any change in equator-pole temperature differences creates altered regional climates, since temperature differences influence largescale atmospheric wind and ocean current patterns. However, for rapid increases in CO2 concentrations, Thompson and Schneider found a reversal of the equator-pole temperature differenc~'in the Southern Hemisphere over many decades during and after the rapid build-up of CO2, This would imply unexpected climatic conditions during the century or so the climate adjusts toward its new equilibrium state. In other words, the faster and harder we push on nature, the greater the chances for surprise-some of which are likely to be damaging. Clearly, rapid transients or non-linear events are likely to cause alterations to higher statistical moments of the climate (e.g. week-'toweek variability, seasonal amplitudes, day-to-night temperature differences, etc.). Such rapid or unexpected events are likely to contradict the 'invariance of higher moments'. Thus, resultant environmental or societal impacts are likely to be different from those that would occur with smoother, slower changes. The long-term impact of climate change may not be predictable solely from a single steady state outcome, but may well depend on the characteristics of the transient path; the outcome may be path-dependent. Any exercise, which neglects surprises or assumes transitivity of the earth system (i.e., a path-independent response) is, therefore questionable, and should carry a warning to users of the fundamental assumptions implicit in the technique dependent on steady state results. Assessment and reporting of uncertainties Moss and Schneider (2000) and Moss (this volume) note that the term uncertainty can range in implication from a lack of absolute sureness to such vagueness as to preclude anything more than informed guesses or speculaPacific and Asian Journal ( tion. Uncertainty results from lack of information, or is caused by disagreement about what is known or even knowable. Some categories of uncertainty are amenable to quantification, while others cannot be sensibly expressed in terms of probabilities. Uncer~ tainty is not unique to the domain of climate change research. However, in climate research, problems are compounded by additional characteristics. These include their global scale, long time lags between forcing and response, low frequency variability with characteristic times greater than the length of most instrumental records, and the impossibility of before-the-fact experimental-controls. Moreover, because climate chan~e and other complex, socio-technical policy..ssues are not just scientific topics but also matters of public debate, it is important to recognize that even good data and thoughtful analysis may be insufficient to dispel some aspects of uncertainty associated with the different standards of evidence and degrees of risk avers-ion/acceptance that individuals participating in this debate may hold. .. Surprises A surprise is an unanticipated outcome. However, the IPCC (Intergovernmental Panel on Climate Change) SAR (Second Assessment Report), defines surprises as rapid, non-linear responses of the climate system to anthropogenic forcing, and cites analogies to paleoclimatic abrupt events to demonstrate the plausibility of such a possibility. The SAR also gives specific examples of such non-linear behaviours that the authors could envision as plausible (e.g. reorganization of thermohaline circulation, rapid deglaciation, fast changes to the carbon cycle). It would be better to define these as imaginable abrupt events. The Working Group I SAR concludes its Summary for Policymakers with the statement that non-linear systems when rapidly forced are particularly subject to unexpected behaviour (IPCC 1996a). Of course, :>f Energy 10(1): 81-106 84 S H Schneider, K Kuntz-Duriseti, C Azal' the system would be less rapidly forced if decision makers chose, as a matter of policy, to slow down the rate at which human activities modify the atmosphere. To deal with such questions the policy community needs to understand both the potential for surprises and how difficult it is for lAMs (integrated assessment models) to credibly evaluate the probabilities of currently imaginable surprises let alone those not currently envisioned (Schneider, Turner, and Morehouse Garriga 1998). Valuation of costs of climate