Common Tragedies

Thoughts on Environmental Economics

How do Catastrophes Factor into our Calculations?

Posted by jab12004 on April 20, 2009

I’ve always been fascinated by the idea of including the probability of a catastrophic climate event when calculating the costs and benefits of climate change. Even if the probability is very small, the sheer devastation of such an event can factor into climate estimates. Other models can have tipping points, where once a certain temperature is reached, a chain reaction is triggered which can accelerate CO2 release. I am in no way an expert on models that deal with each of these phenomena, but I did recently see a piece of news which disturbed me greatly.

The article titled “Forests could flip from sink to source of CO2: study” link discussed findings by “35 of the world’s top forestry scientists”

If temperatures climb even further, the consequences could be devastating, according to the report by the Vienna-based International Union of Forest Research Organisations (IUFRO).

“The current carbon-regulating functions of forests are at risk of being lost entirely unless carbon emissions are reduced drastically,” said Alexander Buck, IUFRO’s deputy director and coordinator of the report.

“With a global warming of 2.5 C (4.5 F) compared to pre-industrial times, the forest ecosystems would begin to turn into a net source of carbon, adding significantly to emissions from fossil fuels and deforestation,”

While estimates of devastation due to large temperature increases are not new, these recent warnings are still very scary. A lot of the carbon loss will be in the tropics, an area which captures almost 20% of total carbon emissions according to the article.

This recent finding brings a few questions to mind. First, as another tipping point is identified, how do we account for it in our cost/benefit analysis of climate policy?  Hopefully results such as these will highlight the growing importance of Domestic and International climate agreements.

My second question is about forestry offsets.  Do they not lose some of their value if they might eventually release the CO2 they were supposed to be offsetting?

3 Responses to “How do Catastrophes Factor into our Calculations?”

  1. Rhys said

    “Even if the probability is very small, the sheer devastation of such an event can factor into climate estimates.” This is a good “the power of small”-type issue. Environmentalists used to talk a lot about how with global warming, the average temperature would go up one degree from one particular date to another. To most people, this didn’t sound like a big deal. But models have shown that a one degree increase in temperature could lead to 20,000 deaths and four times more fires. Power of small.

  2. Danny Morris said


    The problem is that no one really knows where these tipping points exist, so planning for them is extremely difficult. It’s impossible to say at what exact point is a system is so completely altered that it switches to an entirely new regime, which is what you’re looking at with climate change. We honestly have no idea when it will get hot enough to push half of Greenland to melt, and even if we could, it’s possible that by the time we knew what was happening, the inertia in the system would carry us past the tipping point anyway. Much of the reason that scientists advocate emission limits that don’t exceed 3 degrees C is so that we can avoid some tipping points. The NYT has an interesting recent article about it here:

    Second, if an offset releases carbon into the atmosphere, it’s not longer an offset, it’s an emission. One of the major challenges with setting up robust offsets to be incorporated into a cap-and-trade system is this issue of permanence. if you buy a bunch of forest land, and two years later, it all goes up in flames, you don’t get any credits for it, even though you spent a pretty penny on it. One of the many issues with offsets.

    i suppose i could have to come to your office and told you all this though. oops.

  3. Carlos Ferreira said

    Interesting point about the offsets, there.

    I made the same question of how to represent mathematically the tipping points in an econometrics class. My lecturer, who has a neo-classical background, mentioned a situation of heteroscedasticity. I believe the answer lies somewhere in dynamic systems theory.

    Either way, if it happens, we’re stuffed and some crazy mathematician is going to shout “I told you so!”.

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