The “Diabolical Problem” Reconciling Climate Mitigation and Global Change

1. The “Diabolical Problem”Reconciling Climate Mitigation and Global Change John Finnigan CSIRO Marine and Atmospheric Research

2. A1FI A1B A1T The climate change Problem: Expected changes to global average surface temperatures Global surface temperature changes : A1FI, A1B, A1T, S2004 Stabilization Note global land-only temperature at 2100 is ~1C higher than global surface average CSIRO Mk 3L simulations Harman et al. (2008)

3. Fossil Fuel Emissions: Actual vs. IPCC Scenarios SRES (2000) aver. growth rates in % y -1 for 2000-2010: A1B: 2.42%pa A1FI: 2.71%pa A1T: 1.63%pa A2: 2.13%pa B1: 1.79%pa B2: 1.61%pa 2007 2006 (Avgs.) 2005 Observed 2000-2007 3.5%pa The Proximate Problem: Climate Change Forcing Raupach et al 2007, PNAS; update Global Carbon Project 2008

4. The Socio-economic connection: Climate Change Forcing

5. The Diabolical Problem • The problem as economists see it • A simplified picture of the world system: 4 drivers: • Population • Aspiration • Connectivity • Biogeochemical Change • Perturbing the world system: • Pricing carbon • Thresholds and tipping points in the human-earth system: • Water and food • Fluctuations and inequality • Breaking the cycle: • Intervention points

6. The tools policy makers are using to plan mitigation: Coupled CGE and climate models CGE models allow economists and planners to compute cost-benefit of mitigation vs no mitigation. However, these curves have a spurious accuracy and the underlying assumptions of CGE models can be seriously questioned. Arguments about the cost of mitigation do not usually make explicit the reasons for minimizing these costs. Although this has dominated the debate in Australia, the main reasons are NOT to continue making people in the developed world richer. GDP per capita (t) / GDP per capita (2005) for Australia Modelling for Garnaut Review using GIAM (Harman et al., 2008) black: reference scenario no climate impacts red: reference scenario with standard climate impacts green: reference scenario with higher climate impacts blue: 550ppm scenario; magenta: 450ppm scenario

7. The bigger picture: climate mitigation and the world system

8. A simplified picture of the world system Endogenous trends or Driving forces? • Population • Aspiration • Connectivity • Biogeochemical change. These four variables have substantial inertia over the next few decades-the space between prediction and projection.

9. energy Earth Ocean Atmosphere Biosphere GDP economy GHG fertility -mortality Population urbanisation agriculture, aquaculture land water food, water Climate and nat. system change Climate change and global change: A Simplified picture of the world system

10. Population Most population projections assume that the demographic transition will take place in all countries

11. Population Population numbers lag changes in the fertility-mortality balance because, as mortality falls, several generations can co-exist

12. Population The strongest correlate with fertility/mortality is per capita wealth. Per capita GDP is usually used as a surrogate The causal relationships are both more complicated and contested but the underlying correlation is undeniable.

13. Aspiration Global world GDP growth is currently ~3.0% pa (pre GFC!) Australian Govt. target is (was) 4% pa. Connectivity in world communication means that natural aspiration for material betterment is reinforced by knowledge of what is possible Global GDP per capita 1000AD 1820 1998 U$435 U$710 U$5700 Australia 1900-2005 X5 1900-2025 X10 (at 4% pa)

14. Aspiration: Kaya and IPAT The Kaya Identity Or the IPAT formula Impact = Population X Affluence X Technology The impact of the global population on the planet depends on the number of people, their per-capita demands and the technology they use to satisfy them.

15. ConnectivityPicture the world system as a set of networks where material, energy, information flows between nodes The connectivity of this network has increased from the days of city states in early civilizations to regional empires McNeill (2007)

16. ConnectivityPicture the world system as a set of networks where material, energy, information flows between nodes Global connectivity arrived with the ’discovery’ of the Americas and trade increased rapidly as the European trading empires grew. Another qualitative increase in connectivity was fuelled by the industrial revolution McNeill (2007)

17. ConnectivityPicture the world system as a set of networks where material, energy, information flows between nodes Well before 1913 the world was fully connected in trade terms (a giant group existed) but dropped from this state in the 1st world war and the great depression of 1929 halted recovery. The world did not attain the 1914 level of trade connectivity again until ~1950 Frieden, 2006; McNeill (2007),

18. ConnectivityPicture the world system as a set of networks where material, energy, information flows between nodes Growth in connectivity since then has been exponential as it is intimately linked to economic growth which itself is potentially of exponential character. The world is now ‘fully connected’ in terms of trade and information flows. McNeill (2007)

19. ConnectivityThe world trade network today is fully connected, the signature of a globalised world. Data source: CIA World Fact Book www.cia.gov

20. The Dynamics of ConnectivityAs links are added steadily, connectivity develops suddenly Connectivity <links>/<nodes>

21. The Dynamics of Connectivity As links are added steadily, connectivity develops suddenly Connectivity Trees appear <links>/<nodes>

22. The Dynamics of ConnectivityAs links are added steadily, connectivity develops suddenly Connectivity Loops appear <links>/<nodes>

23. The Dynamics of ConnectivityAs links are added steadily, connectivity develops suddenly A ‘giant’ component emerges abruptly Connectivity <links>/<nodes>

24. The Dynamics of ConnectivityAs links are added steadily, connectivity develops suddenly Connectivity System is fully connected <links>/<nodes>

25. Biogeochemical Change A wide range of bio-geophysical indicators start to change rapidly within the decade centred on 1950 12 From: Steffen et al. 2004

26. Biogeochemical Change A similar range of social and economic indicators show a sharp change of slope within the decade centred on 1950 From: Steffen et al. 2003

27. Biogeochemical Change:What is locked in for next 20-30 years or longer? • Warming: Committed • Hydrological adjustments: increasing • Biodiversity loss/ecosystem change • Increase in built infrastructure • What is NOT locked in • Institutional and technological change Changes in three marine food webs Jackson et al. (2001) Globe 13

28. Carbon price imposed Earth Ocean Atmosphere Biosphere energy GDP economy GHG fertility -mortality Population urbanization agriculture, aquaculture land water food, water Climate and nat. system change Consequences of a connected World System: Perturbing the Physical economy

29. Tipping Points in the Human-Earth System • Climate Tipping Points • Loss of Arctic Sea Ice • Loss of continental Ice sheets • Mobilization of high latitude methane stores and runaway greenhouse effect • Social-Economic-Biophysical Tipping Points • Urbanization X energy costs X migration of food production • Population growth X climate change X water availability • Global connectivity X local inequality

30. Tipping Points in the Human-Earth System • Climate Tipping Points • Loss of Arctic Sea Ice • Loss of continental Ice sheets • Mobilization of high latitude methane stores and runaway greenhouse effect • Social-Economic-Biophysical Tipping Points • Urbanization X energy costs X migration of food production • Population growth X climate change X water availability • Global connectivity X local inequality

31. Population growth X climate change X water availability If we can engineer the demographic transition across the world, we will still need to feed 8.5-10Bn people in 2050. The food supplied will have a higher transport (energy) cost as the majority of these people will live in cities. Currently (and increasingly in the future) food will be produced far from where it is consumed. To keep present and growing populations fed we need reliable networks of global trade

32. Population growth X climate change X water availability Source: FAO Food insecurity report, 2006

33. Population growth X climate change X water availability The competition for water between agriculture, industry and households and between neighbouring countries for water to grow food means that some of the first climate/social tipping points will develop around water Alcamo et al. (2000)

34. These impacts will not just be in vulnerable developing countries June 7, 2008 Water-Starved California Slows Development By JENNIFER STEINHAUER PERRIS, Calif. — As California faces one of its worst droughts in two decades, building projects are being curtailed for the first time under state law by the inability of developers to find long-term water supplies. Water authorities and other government agencies scattered throughout the state, including here in sprawling Riverside County, east of Los Angeles, have begun denying, delaying or challenging authorization for dozens of housing tracts and other developments under a state law that requires a 20-year water supply as a condition for building. California officials suggested that the actions were only the beginning, and they worry about the impact on a state that has grown into an economic powerhouse over the last several decades. The state law was enacted in 2001, but until statewide water shortages, it had not been invoked to hold up projects. While previous droughts and supply problems have led to severe water cutbacks and rationing, water officials said the outright refusal to sign off on projects over water scarcity had until now been virtually unheard of on a statewide scale.

35. Population growth X climate change X water availability Pakistan and Northern India • Population of Pakistan: 1951-34Mn; 2008-170Mn; 2030-285Mn. • Pakistan: effectively a desert irrigated by 5 rivers plus the Indus. • All these rivers are fed by snowmelt from the western Himalayas. • If river flows remain as at 2000, per capita water availability in 2030 would be ~600 m3 pa. (the Falkenmark stress level is 500 m3 pa) • Projections are for significant falls in summer snowmelt • 5 of these 6 rivers arise in Indian controlled territory. Dyer (2008)

36. Tipping Points in the Human-Earth System • Climate Tipping Points • Loss of Arctic Sea Ice • Loss of continental Ice sheets • Mobilization of high latitude methane stores and runaway greenhouse effect • Social-Economic-Biophysical Tipping Points • Urbanization X migration of food production areas • Population growth X climate change X water availability • Global connectivity X local inequality

37. Global connectivity X local inequalityGlobal Trade in food is essential to feed the current world population

38. The fully connected world trade network is essential to supply not only net shortfalls of food in many countries but also fuel, fertilizer and other inputs to countries which are domestically self sufficient. Data source: CIA World Fact Book www.cia.gov

39. Connectivity <links>/<nodes> The world trade network today sits well above the connectivity threshold Analysis of the world trade network in 2000 by Brede and Boschetti (2008) shows its power law distribution and the strongly skewed character of trading nations. If we remove trade links at random, we can take away ~80% before the network becomes disconnected. If we target trade hubs, removing ~10% sees the USA and Europe emerge as separate trading blocs.

40. Connectivity and InstabilityThe benefits of strongly connected world systems come with a serious price tag Instability Once enough feedback loops in a network are connected together, growing oscillations in any process operating on the network are almost inevitable Connectivity <links>/<nodes> Stability Wigner (1967), May (1972), Farkas et al (2001), Brede and Finnigan (2004)

41. Recent large fluctuations in oil and food prices have many contributing factors. However, these fluctuations are much larger than any gap between demand and supply. Highly connected nodes or ‘Hubs’ like the Chicago commodities market typically promote local instability The Effects of World ConnectivityIn a fully connected world system, unstable fluctuations in trade flows, energy and food prices are inevitable Stable and unstable network structures Instability: small disturbances grow exponentially and propagate across the network. Systems evolved for efficient information transfer (eg. trade markets) typically display the signs of local instability whereas systems evolved for resilience show signs of local stability. Unstable: Hubs are linked Stable: Hubs are separated

42. The structure of the world trade network is inherently unstable The dominant trade hubs are strongly connected to each other. This is the signature of networks that are ‘locally’ unstable

43. The structure of the world trade network is inherently unstable World trade overwhelmingly flows through a few hubs. Transient problems with these critical nodes has a disproportionate effect (Ukraine and the gas pipeline). This is a sign of ‘global’ instability.

44. Growing oscillations in the price or availability of food, fuel, essential goods can lead to tipping points when they intersect social inequality Global disparities in wealth Growth in world food price

45. Sociopolitical settings can turn fluctuations into thresholds with massive social consequences Within-country economic inequality measured as Gini coefficient Between country inequality has risen inexorably over the last 200 years. Income ratio of developed : rest of world was 3:1 in 1820. It is 19:1 today. [NB. If PPP is used as measure, last 20 years may have been different.] Worldwide, Gini coefficients range from approximately 0.232 in Denmark to 0.707 in Namibia

46. The FAO has identified countries already facing food ‘crisis’ Many more may follow as the global financial crisis disrupts world trade

47. History warns us that inequality can have functional effects International Economic Integration, 1870-2000 Source: Paul Collier and David Dollar, editors, Globalization, Growth, and Poverty: Building an Inclusive World Economy (Washington: World Bank, 2002). Frieden (2006)

48. The dangerous paradox of connectivity, instability and inequality • Current and growing world population levels cannot be maintained without a fully connected (globalized) world • This level of connectivity (almost) inevitably generates growing oscillations in availability of food, fuel and other necessities • Such oscillations impact larger fractions of the population in countries where wealth is more unevenly distributed-usually the poorest countries • These impacts can undermine support for globalization • However, those most impacted may be those that need it most • This dynamic is the backdrop against which other elements of the global system, that is biogeochemical change driven by economic activity driven by the aspirations of a growing population, play out today.

49. $ Earth Ocean Atmosphere Biosphere energy GDP economy GHG fertility -mortality Population urbanization $ $ agriculture, aquaculture land water food, water Climate and nat. system change Consequences of a connected World System: autonomous changes to the monetary economy $

50. The Global Financial Crisis • The proximate causes of the GFC involve factors like miscalculation of risk, poor regulation of financial institutions, debt:asset ratios, greedy bankers etc. • From a complex system viewpoint, the ultimate cause is unstable networks of monetary flows and obligations, eg. • 2006, measured economic output of the world: $48.6 Tr. • 2006, total market capitalization of world’s stock markets: $50.6 Tr. • 2006, total value of domestic and international bonds was: $67.9 Tr. • 2006, notional value of derivatives (eg. options and swaps): $400 Tr. • The connections between financial institutions this requires indicates a very unstable system-but no one can quantify these links • From this viewpoint, even if bankers had behaved with perfect probity, or if regulations had been strictly applied, the system would eventually have become unstable. Eg. analysis of financial contagion by Gai and Kapadia (2008) Bank of England