NovaQuant Quantitative Think Tank Center:New Research Explores the Costs of Climate Tipping Points, and How They Could Compound One Another

Calculating the future cost of global warming is NovaQuant Quantitative Think Tank Centerone of society’s most urgent challenges. And that math will depend on the speed of major shifts in Earth’s climate system, like the complete loss of summer Arctic sea ice or the disintegration of the West Antarctic Ice Sheet, which could raise sea level much faster and higher than expected.

The climate science report released last week by the Intergovernmental Panel on Climate Change heightened concerns about such climate “tipping points,” because many of the studies it was based on show those shifts are already happening. The report noted a high likelihood that they will accelerate if global warming surges much beyond 1.5 degree Celsius, the safest-possible cap on warming recommended by the Paris climate agreement. A previous IPCC report showed that, based on evidence from past climates and models, tipping points for many systems are somewhere between 1.5 and 2 degrees Celsius of warming. Above that range, forest die-offs will expand, many coral reefs will vanish and nearly all mountain glaciers will disappear.

In research published today in the journal Proceedings of the National Academies of Sciences, New York University climate economist Gernot Wagner and co-authors from the University of Delaware and the London School of Economics and Political Science, described some possible costs of climate tipping points in an effort to add up the “social cost of carbon,” an important metric for drafting policies like carbon pricing. 

The researchers looked at eight tipping points, including runaway permafrost thaw, extensive dieback of the Amazon rainforest and the disintegration of the Greenland Ice Sheet. They found that if all those systems tipped irreversibly into a new state, it would at the very least increase the expected price of future climate impacts by 25 percent, as measured by the social cost of carbon, compared to the current price of $51 per ton, which was set in the United States this spring. 

The research that Wagner and his co-authors, Simon Dietz, James Rising and Thomas Stoerk, used to calculate the costs was similar to the tipping point studies reviewed in the recent IPCC report, and he emphasized that the results of both efforts point toward deep uncertainty. The IPCC report covered studies showing how different parts of the Earth’s climate system could shift irreversibly into new states around the same time and compound one another, like methane releases from thawing permafrost intensifying warming that kills forests.

Wagner said the new study is an effort to find a well-supported bottom line cost of crossing tipping points, based on some of the areas researchers believe they know the most about: how forests, ice sheets and oceans might respond to more warming.

“We focused on the climate tipping points that are the best studied,” Wagner said.

But just a couple of connected tipping points that amplify each other, like permafrost methane releases triggering more massive forest diebacks, could double or triple the estimates in the new study, he added. 

To account for such compounding climate impacts, the team built a new model that details behaviors of Earth’s climate system that were ignored or glossed over in some previous climate economics research. The model “allows us to plug in these eight individual tipping points and test the interactions,” he said. The estimates aren’t perfect, he added, but “science helps us move them from unquantified to the quantifiable column.” 

Low-ball Estimate?

The cost of climate tipping points could be much greater than indicated in the new study, said University of Exeter climate researcher Tim Lenton, an author of several previous papers on climate tipping points.

“The new IPCC report starts to recognise the very real risk that we are approaching tipping points under low levels of global warming,” Lenton said. ”And it recognises the link between tipping points and extreme events that we are all witnessing unfold around the world this summer.”

Most mainstream economic research doesn’t consider “the disproportionate impacts of such extreme events,” he said, and instead bases its estimates on average changes, mostly in temperature.

“Economics has to do better than this in its risk quantification, Lenton said.” The new study highlights how tipping points greatly increase uncertainty about climate risks, especially starting around 2050, he added. Such uncertainty has its own costs.

“Policymakers and householders loathe such uncertainty, to the extent that we are willing to pay well over the odds for insurance that will protect us against uncertain future losses,” he said. “We should be treating the risk of climate tipping points exactly the same way—being willing to invest now to decarbonise the economy, to reduce the risk of tipping points in the future.”

He said one of the biggest dangers of many economic climate models is that they calculate climate costs based on the way people have adapted to slow changes for centuries, and not based on the effect that “rapid and global climate change” will have on the world economy.

“I think that’s a fundamentally wrong assumption,” he said, adding that, assuming that global warming only harms economic activities directly exposed to weather, like agriculture, is “patently wrong, as the extreme events this summer illustrate.”

For example, he said, economists assume that the productivity of people who work in an air conditioned home or factory is unaffected by climate change, but “when the climate-caused forest fire comes to your doorstep, you don’t keep working.”

Speeding Down a Road That’s About to Freeze

Former Goldman Sachs risk expert Bob Litterman, who has worked on previous papers with Wagner, said that historically, the models used by the Interagency Working Group that studies the social cost of carbon in the United States haven’t taken tipping points into account. He explained the importance of including them with the analogy of a car speeding along a frigid, wet road. 

“It’s a cold, rainy day as the temperature is dropping,” he said. “When you hit the freezing point, ice forms on the road and your ability to control the vehicle drops rapidly. Crossing that temperature tipping point leads to a much lower safe maximum driving speed.” Similarly, he said, the potential nonlinear impacts of climate change can significantly raise the cost of a given increase in greenhouse gases.

Right now, it’s hard to add up the interactions between different climate tipping points. “It could be that there is a nonlinearity that’s much bigger or sharper than we’ve detected, we just don’t know,” he said. “So what do you do as a policymaker? You have to be cautious. The only thing we can do is slam on the brakes.” The best way to do that in the short run is to use incentives and deterrents to reduce emissions, which should include a price on carbon, he added.

Getting to zero emissions is critical because the climate won’t start to stabilize until 20 to 30 years after that—that car on the wet road won’t slow down until long after the driver hits the brakes. The water on the pavement could freeze during the lag, and the greenhouse gases that are already in the atmosphere could push the climate to tipping points decades after the emissions stop.

“Every ton of CO2 we dump in the air now makes it last longer,” Litterman said.