![]() We have also tried to use paleoclimate data and the observed response of climate to large volcanic eruptions to narrow down the probability distribution. So far it has been difficult to quantify tail risk beyond that implied by figures such as Figure 14. It is vitally important that we account for this tail risk as well as the most probable outcomes. But, given the corresponding distributions of rainfall, storms, sea level rise, etc., the 5% high-end may be so consequential, in terms of outcome, as to be justifiably called catastrophic. More or less in agreement with the most recent report of the Intergovernmental Panel on Climate Change (IPCC), the most probable “middle” of the distribution runs from about 1.5☌ to about 4.5☌, while there is a roughly 5% probability of temperature increases being less than about 1.8☌ and more than about 4.6☌. We use this here as an illustration it should not be regarded as the most up-to-date estimate of the probabilities of global temperature increases. To illustrate this a bit more concretely, take a look at Figure 14, which shows an estimate of the probability distribution of global mean temperature resulting from a doubling of CO 2 relative to its pre-industrial value, made from 100,000 simulations with a particular climate model. It becomes almost a philosophical question how much we might be willing to spend to avoid the unlikely, but not so comfortably improbable possibility of truly catastrophic outcomes. But if climate change is worse than what we currently think is the most likely outcome, we face the possibility of catastrophic outcomes, so catastrophic that it might be difficult to really attach any definite number to the likely costs. If we want to be admired by our descendants, the best strategy is to stick with the most probable outcomes and with high probability we can then ridicule those “alarmists” who warned of the tail risks, just as the adult who advises the child to cross the street will, in all likelihood, be able after the fact to chastise the one who counseled against it.Īs we explain in the next chapter, in the case of climate change, the most probable outcomes over the next century, barring any action to curtail the emission of greenhouse gases, incur serious costs to society. The accusation of “alarmism” is often quite effective in making scientists skittish in conveying tail risk, and talking about the tail of the distribution is a sure recipe to be so labeled.Īfter all, by their very definition, such risks are unlikely to be the outcome. The legitimate fear that the public will interpret any discussion whatsoever of tail risk as a deliberate attempt to scare people into action, or to achieve some other ulterior or nefarious goal, is enough to make most climate scientists shy away from any talk of tail risk and stick to the safe high ground of the middle of the probability distribution. We also need to confront the tail risks associated with low probability but potentially catastrophic outcomes, such as large and rapid sea level rise due to a collapsing ice sheet.īut there are strong cultural biases running against any discussion of this kind of tail risk, at least in the realm of climate science. When we confront the risks associated with climate change, we need to know something about the probabilities of different climate outcomes, the costs those outcomes might impose on society, and the costs and benefits of mitigating climate change. The costs are just way too high, particularly when weighed against the relatively low cost of walking to a pedestrian crossing. ![]() The probabilities of tail risks might be very small, but we cannot ignore them because the costs can be very high.įor example, if you were told by a reliable source that there is a 1% probability that your child would be run over if you let them cross a busy highway, you would almost certainly not take that risk even though the odds are vastly in your favor. Economists call this the problem of “tail risk”, because it relates to the risks associated with the far ends-“tails”-of probability curves. ![]() Quite often, the very worst outcomes have very low probability, and it is often quite difficult to assess the true probability of very low probability events. We are then in a position to decide how much, if anything at all, we would be willing to spend to avoid that outcome. The assessment of risk therefore requires that we multiply the cost of the outcome by the probability of that outcome. ![]()
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