The Global Warming Policy foundation today published a pamphlet WHAT IS WRONG WITH
STERN? The Failings of the Stern Review of the Economics of Climate Change by Peter Lilley MP.
Lilley criticises ‘Stern’s selective emphasis on alarmist interpretations and downplaying of uncertainties’ (p4). Richard Tol in his foreword claims that ‘Lilley also reveals that the errors are systematic and suggestive of an ideological bias’.
This surprised me, because in the years following the publication of the Stern review, researchers have been concerned that far from being alarmist, its impact estimates may well underestimate US and global damages.
I created PAGE2002, the Integrated Assessment Model used by Stern for its aggregate impact estimates, so I thought I would see what Lilley had to say about PAGE2002.
Lilley claims that for economic losses in PAGE2002, ‘a 2.5°C temperature rise is deemed to reduce GDP by between 1.5% and 4% – with a median 2% loss’ (p35).
I have no idea where he found those figures.
In the default PAGE2002 model, the actual reductions in GDP from economic losses for a 2.5°C temperature rise are between -0.1% and 1% of GDP with a median loss of 0.5%. That’s right. The default PAGE2002 model actually allows a small chance that the impacts of global warming will be positive, and Lilley overstates the median impacts in the model by a factor of four.
But there’s more. While Lilley acknowledges that in PAGE2002 ‘ a proportion of losses – lower in less-developed countries – is assumed to be prevented by adaptation’ (p35), he doesn’t say what that proportion is. Would you like to know? In OECD countries, it’s over 90%. The default PAGE2002 model assumes that 100 percent of the economic damages resulting from the first 2 degrees of warming, and 90 percent of economic damages above 2 degrees, are eliminated by adaptation.
Taking this into account, Lilley has overestimated the median economic damages in the PAGE2002 model by over a factor of 40.
I can’t help but think this is an error by Lilley that is, in Richard Tol’s words, ‘systematic and suggestive of an ideological bias’. If this is typical of Lilley’s rigour, then I know whose work would lead me to declare ‘it’s academic value is zero’, and it isn’t Stern’s.