We deserve better climate modelling, says Lord Stern

British economist and academic Lord Nicholas Stern has called on researchers to improve radically the models used to estimate the costs of acting on climate change.

In a comment in the journal Nature, Lord Stern argued that flawed climate modelling is deeply damaging to public policy and that people around the world deserve better. He noted that existing models tend to underestimate the damages caused by climate change, as well as the potential of technology to help avoid dangerous climate change.

“Current economic models tend to underestimate seriously both the potential impacts of dangerous climate change and the wider benefits of a transition to low-carbon growth,” Lord Stern wrote. “There is an urgent need for a new generation of models that give a more accurate picture.”

Lord Stern pointed to the Intergovernmental Panel on Climate Change’s (IPCC) Fifth Assessment Report, which acknowledges the difficulties in estimating the global economic impacts of climate change. Existing integrated assessment models (IAMs), for instance, “struggle to incorporate the scale of the scientific risks” as they do not account for tipping points and catastrophic changes that can be triggered, as well as large potential impacts such as extreme weather and conflict.

“It is these hard-to-predict impacts that are the most troubling potential consequences of inaction,” Lord Stern wrote. “The next IPCC report needs to be based on a much more robust body of economics literature, which we must create now.”

He additionally argued that current models of the economic impacts of reducing greenhouse gas emissions can mislead policymakers saying the business-as-usual baseline “conveys a profoundly misleading message to policymakers that there is an alternative option in which fossil fuels are consumed in ever greater quantities without any negative consequences to growth itself”.

Economic models for climate change must therefore be improved radically, Lord Stern said. He suggested that ‘damage functions’, which describe how losses increase due to climate change impacts, should be made more realistic; that dynamic stochastic computable general equilibrium (DSGE) models be introduced to account for uncertainty about the future through the introduction of shocks; and that agent-based models (ABMs), used in the finance sector, could help understand complex changes to the economy under climate change.

“A concerted effort is required by the research community to explore as many potential avenues as possible to better estimate the costs of action and inaction on climate change,” Lord Stern said. “The IPCC should distil what policymakers need to inform their decision-making. Learned societies and national academies must bring together researchers from a wide range of relevant disciplines to focus attention on improving economic modelling quickly.”