FST JOURNAL

 The two-week-long COP28 conference in the United Arab Emirates got underway with the World Climate Action Summit, which brought together 154 Heads of States and Government. Among the milestones reached at the summit was an agreement on operational structure of the loss and damage fund and funding arrangements. It was the first time a substantive decision was adopted on the first day of the conference. Commitments to the fund of more than $700 million had been received by the close.

The Presidents Office of the Republic of Maldives

 

Climate finance took centre stage at the conference, with UN Climate Change Executive Secretary Simon Stiell repeatedly calling it the “great enabler of climate action.”

The Green Climate Fund (GCF) received a boost with total pledges by the end of the event standing at $12.8 billion from 31 countries, with further contributions expected.

However, these financial pledges are far short of the trillions estimated to be necessary to support developing countries with clean energy transitions, implementing their national climate plans and adaptation efforts.

Economics and finance

The importance of economics and finance in delivering action on climate change was highlighted with the Royal Society and the International Science Council co-hosting a side event entitled ‘Better understanding economic impacts of climate change and accelerating science-based climate action’.

Science is fundamental to global climate policy processes and action. The findings of physical climate science have generated a deep understanding of the very serious risks to human societies and ecosystems. Economists also have sought to understand and assess the economic impacts of current and future climate and to inform governmental and private sector policies, finance, and strategic decisions.

However, many economic assessments do not adequately reflect the scientific evidence of current and future climate change, often resulting in misleading portrayals of the possible economic consequences of climate change.

According to the Royal Society, this highlights the need for fundamental changes within science itself that would lead to a more enhanced inter- and transdisciplinary collaboration between physical science, economics, and other social sciences. This will be necessary in order to overcome the long-term disconnect that has existed between these disciplines and society in the context of climate change.

This side event presented key findings of the work undertaken by the Royal Society and the International Science Council on how to better understand economic impacts of climate change and accelerate science-based climate action globally.

The session focussed on a report that was developed from a two-day conference in March 2023, under the lead of Lord Nicholas Stern FRS. The Royal Society brought together leading international experts from the physical sciences, economics, and other social sciences to discuss how to improve the understanding of economic consequences of climate change.

The findings outlined the key actions and research priorities needed to improve approaches to climate economics and increase climate action.

Climate change economics

Economic analysis and modelling are used to quantify potential changes in the economy, natural environment, and/or other social systems and to understand decisions and choices. Economists can also use analysis and models to estimate the economic impacts of climate change, due to, for example, increased temperatures and extreme events.

However, most current approaches to economic assessments of impacts of climate change do not reflect the severity of consequences that are suggested by the latest physical climate science and evidence on impacts, due to a disconnect between the economics and physical sciences disciplines.

Missing aspects of the physical impacts of climate change include, for example, the full consequences of extreme weather events and the potential for cascading risks and tipping points. Interdisciplinary collaboration between physical scientists, economists and other relevant disciplines could help to better integrate the latest physical science into economic assessments, analytical approaches, and models, by sharing scientific evidence in formats that are more tailored to the needs of economists.

This dialogue needs to be two-way and address fundamental gaps in methods, such as by scientists and economists working together to develop new approaches to assessments. Working directly with decision-makers during the process of developing new approaches would further ensure their outputs address the information needs of decision-makers.

Many economic assessments of climate change adopt an approach based on standard welfare economics. As such, they do not take explicit account of the rights and obligations of current and future generations. Justice is in large measure about the respecting of rights. For example, many assessments focus on the consequences of climate change on overall or aggregated human welfare and discount the welfare and experiences of future generations using discount rates which have little basis in ethics, and which are inadequate in their treatment of potentially very bad outcomes.

The treatment of discounting is often cavalier for these reasons. Many economists are increasingly uncomfortable with the way and degree to which the future is discounted within standard welfare approaches and resulting consequences for policy.

Further, there are alternative ethical frameworks and moral philosophies that would re-shape climate change economics and drive discussions about, for example, what a virtuous society would do, or how to ensure that particular human rights are respected. Assessments could integrate non-welfarist approaches that value, for example, knowledge, culture and nature

Uncertainty

Physical sciences and economics often address uncertainty by presenting a likely range of estimates. However, this can underplay the policy relevance of low-likelihood, or unknown likelihood, high-impact outcomes. This means policymakers may not be aware of possible outcomes outside of the indicated likely range of estimates, potentially leading to under-preparedness for more extreme scenarios.

One alternative approach could be the use of storylines, which use conditional ‘if-then’ statements to show a range of plausible outcomes, including low-likelihood, or unknown likelihood, high-impact scenarios. A storyline approach to communicating the risks of climate change could help policymakers to better prepare policies and actions which take account of the full range of possible scenarios.

The scale of recent changes across the climate system as a whole — and the present state of many aspects of the climate system — are unprecedented over many centuries to many millions of years. Economic assessments of climate change are often based solely on observed past data and rely on unrealistic extrapolation for estimating future economic impacts of climate change.

This results in a failure to consider outcomes that might occur under unprecedented levels of global warming. For example, projecting existing or past relationships of climate variability and migration may be less valid as variables that drive migration, including demographics and migration policies, are likely to change, possibly dramatically.

Addressing key research priorities would contribute to improving economic assessments of the impacts of climate change. Improved estimates would help to better inform strategic decisions for enhanced climate action. Such research priorities may include: integrating extreme events and other climate-induced hazards in economic assessments; understanding the impacts of Earth system tipping points and non-linear processes, and integrating these into economic assessments and; accounting for adaptation in economic assessments of climate change.

https://royalsociety.org/news-resources/publications/2023/climate-change-economics

Engineering and climate change

At the end of COP28, Professor Sir Jim McDonald FREng FRSE, President of the Royal Academy of Engineering, noted: “I am pleased to see the international agreement that was reached at COP28 after two weeks of intensive discussion, having included a firm commitment to move away from fossil fuels. Our world is already at a tipping point that requires our global leaders and our generation to transform the world from an economy driven and enabled primarily by fossil fuels to one powered by renewable sources of energy.

“As engineers we have a solemn responsibility to future generations to create a sustainable society in which our own economic development does not compromise their ability to meet their own needs. Transitioning to net zero, in both high- and lower- income countries, is in fact an opportunity to create new markets, innovative technologies and opportunities from which everyone can benefit. For example, offshore floating wind has enormous potential and could provide a practical route for oil and gas workers to transfer their skills to renewable energy.

“Engineering will be at the heart of the net zero transition and the commitments made today can only be achieved using a systems approach that considers this as a holistic environmental, social, policy and technological challenge.”