Complexity, Climate Change and the Precautionary Principle

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Complexity, Climate Change and the Precautionary
Principle

• John Quiggin
• Risk and Sustainable Management Group
• Schools of Economics and Political Science,
• University of Queensland

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Web sites

• RSMG http//www.uq.edu.au/economics/rsmg/index.htm
  
• Quiggin http//www.uq.edu.au/economics/johnquiggin
  
• WebLog http//johnquiggin.com

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Background

• Increasing emissions of greenhouse gases
• CO2
• Methane
• CFCs and others
• Observed increase in global temperature
• 0.5 degrees in C20, mostly after 1970
• A range of model-based forecasts
• Projections of 2-3 degrees warming under doubling
  of C02

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A complex system - the objective view

• Nonlinearity
• Thresholds
• Sources and sinks
• Interactions and feedbacks
• Water vapour
• Methane
• Emergent properties

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A complex system - the subjective view

• System cannot be fully understood
• Multiple levels of uncertainty
• Surprises not yet taken into account in models
• Uncertainty about conflicting models
• Parametric uncertainty
• Bounded rationality means that our understanding
  is always limited

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Learning and discovery in complex systems

• A hierarchy of more and less refined
  representations
• Uncertainty represented by probabilities over
  states of nature
• Propositions about the world
• Learning takes place through new information
  about states of nature
• Discovery of previously unconsidered propositions

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Rainfall

• Initial view of rainfall as variable, with medium
  term cycles
• Probabilities derived from 100 years of
  observations
• Learning through additional observations
• Discovery of unanticipated climate change

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Nuclear power plants

• Attempts to predict and control all possible
  paths to system failure/core meltdown
• Rasmussen report 1974
• risk of a dangerous accident infinitesimally
  small
• Failed to anticipate path leading to Three Mile
  Island partial meltdown
• Risks greatly under-estimated

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The Precautionary Principle

• Many definitions
• Compare sustainability
• All concerned with innovation in the presence of
  uncertainty
• Rarely related to formal models of decision under
  uncertainty

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Wingspan Declaration

• "When an activity raises threats of harm to human
  health or the environment, precautionary measures
  should be taken, even if some cause-and-effect
  relationships are not fully established
  scientifically."

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The Incompleteness Hypothesis

• No model of uncertainty captures all relevant
  aspects
• General bias towards optimism
• Bias is greater when problem is imperfectly
  understood
• Implies support for some form of precautionary
  principle

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Incompleteness as a meta-hypothesis

• Estimates derived from formal models of choice
  under uncertainty will generally be
  overoptimistic and that the errors will be
  greater, the less well the problem in question is
  understood.

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Incompleteness and the precautionary principle

• Crucial auxiliary hypothesis
• Consequences of innovations less well-understood
  than those of the status quo
• In a dynamic situation not always easy to define
  the status quo

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Implementation of the precautionary principle

• Identify areas of high uncertainty
• Avoid reliance on point estimates
• Pay attention to option value and flexibility
• Dont discard rules of thumb that have performed
  well

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Application to climate change

• Consequences of business as usual are poorly
  understood
• Costs of limited mitigation are small
• lt 1 per cent of global income for Kyoto
• Costs of CO2 stabilisation are modest
• around 3 per cent of global income for 550ppm
• Precautionary principle suggests mitigation

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Resilience

• For simple systems, can formally model stability
• For complex systems need a concept of resilience
• Capacity to recover from shocks
• Flexibility and (bio)diversity

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Policy conclusions

• Ratify Kyoto
• Set up emissions trading system now
• Bring in developing countries after 2012