I suspect I am not alone in having a copy of the report from two J P Morgan economists on climate change, that J P morgan has denied is their responsibility even though their name is all over it with no disclaimers that I can see attached.
It includes comments like this:
Most likely, these estimates of the income and wealth effects of unmitigated climate change are far too small. Econometric models are based on historical data of variations in temperature and precipitation seen over recent decades. But, we have not seen enough variability in the data to make these models reliable. A BAU climate policy would likely push the earth to a place that we haven't seen for many millions of years. Experience over recent decades is not a useful guide to that kind of future.
Moreover, economists have struggled to quantify the impact of other aspects of climate change beyond temperature and precipitation, such as extreme weather events, droughts, heatwaves, floods and sea level increases. These broader aspects of climate change would not only impact GDP and welfare directly, but would also have indirect effects via morbidity, mortality, famine, water stress, conflict and migration.
There will also be damage to buildings and infrastructure and possibly the premature scrapping of some of the capital stock as policy and technology change. Moreover, there are plenty of non-linearities in both the climate system and the macroeconomy which could make the economic consequences of BAU much more severe.
BAU stands for 'business as usual'.
The report concludes that:
To contain the change in the climate, global net emissions need to reach zero by the second half of this century. Although much is happening at the micro level, it is hard to envisage enough change taking place at the macro level without a global carbon tax.
But, this is not going to happen anytime soon. Developed economies, who are responsible for most of the cumulative emissions, worry about competitiveness and jobs. Meanwhile, Emerging and Developing economies, who are responsible for much less of the cumulative emissions, still see carbon intensive activity as a way of raising living standards. It is a global problem but no global solution is in sight.
I agree that a carbon tax is not going to happen.
The only available solution is to make business itself change - and become net-zero, including at Scope 3 of the greenhouse gas protocols, as sustainable cost accounting requires.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
There is a similar level of uncertainty within EU institutions. Addressing climate change is an engineering & funding problem. “Developed economies, who are responsible for most of the cumulative emissions, worry about competitiveness and jobs”. The politicians worry – but that is because nobody has offered them solutions and/or their mindset locks them into a particular path: Germany – energy renovation of houses running at below 1%/year – needs to be +3%. Action so far – zero. reason: corner shop accounting approach to national/EU accounting (witness the recent arguments over the EU budget – why not just print? (reason?: ECB is wholly owned subsidiary of the Bundesbank)..
Solution to emissions from for example: the steel sector: available right now, at scale. Problem: money & need to maintain the industry in the face of imports – look ma border carbon taxes. Developing economies…..i.e. hot & sunny places – clue lies with the “sunny” word. 100% of locations could have zero carbon elec’ for a trivial amount of money. Does not happen because “hot & sunny” places tend to be run by kleptocrats & they don’t want “development” that does not give them a piece of the action. (Greece: road to Ford garage – pot hole hell – garage tells local mayor – we will pay to have the road repaired – mayor says – no – because if the garage does the repairs he wont’ get a piece of the action – true story).
One of the other problems is that the climate emergency lies outside of human experience. The energy transition that all countries need to make is a subset of this. To accomplish it needs minds sets with a willingness to take risks and a willingness to throw the rule book out of the window. Len Deightons “Fighter” describes a related situation (existential threat) & what was done.
Humanity now faces a crossroads – does it do policy tweeks (a little bit here and there) or does it rip up the rule book & get serious. Trivial Examples: 40% of all plastic made/used in Eu is single use – throw away. Ok, 18 months – no throw away plastic – you are all bright people – fix it – cos in 18 months there will be no zero throw-away. Tins with drinks in them: 2euro deposit etc etc. I’d keep the kleptocrats fat & happy (bribe them) – on condition that zero elec is introduced to totality of given population. You could even give credit to President Kleptocrat. All this fits badly with “but we must consult with stake (steak?) holders. But we are not in a “consult with steakholders situation” – & indeed many most all steakholders are part of the problem & lobby to keep BAU on the road. Such reactions are understandable – just before Alaric the Goth hit Rome in circa 410AD, the good citizens were still worrying about getting enough wild animals for the games. Nothing like getting your priorities right.
Rant over.
Rant welcome
I must say the language they’re using hints that they’re reluctantly starting to admit some of the inconvenient realities that we face as a species,
it’s rather like watching a vast darkened room full of these masters of the universe all scratching their heads and now and then a light bulb blinking on above one of them,
currently the best two resources I’ve found that supply the information to trigger this process are Ronald Wrights Massey lectures from 2014:
https://www.youtube.com/playlist?list=PLVZpap3ehh_Rsb4MdGsgfw_lbJ8PwnBLY
and Nate Hagens has put together an introduction course for his Freshmen that lays out the foundation of understanding pretty well:
https://www.youtube.com/playlist?list=PLdHV4AV3ixB3Y5_GkHfFD7zzhnozJUsBV
if someone was to invest the time required to take aboard this information then they would probably next want to hear some practical solutions,
I think Vaclav Smil probably has the best understanding of energy and energy transformations and transitions at this current point in human history,
I’ve been reading and viewing anything I can find that he’s made available and I find the breadth of his knowledge quite impressive,
the main thing is that the era of rapid growth in the western world is over,
the current financial system, mode of business thinking and methods for accounting for them were all developed to suit a rapidly growing business environment,
all the old rules have become incompatible with the new reality which demands finding a sustainable steady state for western development,
we don’t need masters of the universe, we need guardians of our planet,
the era of hubris is over, welcome to the era of humility.
The short questions for JPM are, first, do they agree with their “independent” economists that there could be very severe economic consequences from “business as usual”?
If not, why not?
But if they do agree, what are they going to do about it?
They deny it is their report right now, it seems
Just the opinion of employees…..
It doesn’t matter whose report it is: it matters whether or not they agree with it (that is, whether or not they accept reality) , and what they do about it.
Funding renewables, rather than carbon extraction, would be a good start
Agreed….
The can has been opened
They can’t agree with it. That would upset their most important clients and damage their BAU. We should however be charitable; at least they allowed the report to be published rather than just burying it.
It’s not actually published as such…
But copies are circulating
It is slowly sinking in that these problems are just not being addressed in a timely fashion. Even where we do actually know how to fix it and have all the technologies we need, plans are still quite unrealistic and inappropriate. How this affects the move to all-electric transport can be read about here: http://outsidethebubble.net/2020/02/25/electric-vehicles-too-much-hype/
It is gradually sinking in that plans by governments and companies are actually long way from sorting out these problems. Even in an area where we know exactly what to do and the technologies are largely developed there is still an extraordinary degree of naïveté and inappropriate optimism. In the case of electric vehicles see: http://outsidethebubble.net/2020/02/25/electric-vehicles-too-much-hype/
I agree
But the realisation may be growing
“A BAU climate policy would likely push the earth to a place that we haven’t seen for many millions of years. Experience over recent decades is not a useful guide to that kind of future.”
This is at least better than most economists manage, although one should add there were no humans many millions of years ago.
I still think most people have not fully grasped how bad it could get even by 2050.
A carbon tax is not going to work just like cigarette taxes did not stop smoking. Carbon tax is an attempt at a market solution to the biggest market failure the world has ever seen. It punishes the less wealthy who are lower emitters anyway. We have to ration emissions. Big emitters will be given a chance to transition but after that they will be guilty of ecocide.
Entirely agreed Charles
There is an obviously some discrepancy between JP Morgan “not knowing” how this transition would be achieved and all the commenters here that do know that the relevant technologies already exist.
So what do JP Morgan really mean? I think that their report is a little obsolete and their greater concern is (or soon will be) reflected in this idea about: “the premature scrapping of some of the capital stock as policy and technology change” and “although much is happening at the micro level, it is hard to envisage enough change taking place at the macro level without a global carbon tax”
To illustrate what I mean there have been some interesting developments in Australia in the wake of the bushfire catastrophe. The mindset has changed somewhat.
1. Former (Liberal) PM Malcolm Turnbull who was also once a big wig at Goldman Sachs has come out and said that renewables and storage are cheaper than new coal and nuclear. gas.
2. Turnbull’s claim was found to be correct by a comprehensive, academically complex fact check conducted by the Australian Broadcasting Commission (ABC)
3.The Business Council of Australia (who represent the top 130 listed corporations) have called for a carbon price and a legislated net zero carbon transition by 2050.
4. Economist Ross Garnaut, a former Labor govt. advisor has set out an extensive plan for achieving net zero transmissions as well as reviving manufacturing by using hydrogen. The Labor Party is so impressed that they also want to revive the local car industry on that basis.
One take away from this is that the corporate centre-Right have got decisive and staked their position where they should (or somewhere thereabouts). Another is that the appropriate level of technological awareness and vision is finally taking hold. More significant is this solid confirmation of something that many of us have known for a while – that renewables and storage are now cheaper (its official!)
In the medium to long term a carbon price wouldn’t really be necessary for for transport, electricity and (most) industry if renewables and storage are cheaper. Land and agriculture would be a couple of exceptions but for the most part the price mechanism would already be at work in most cases. Moreover the expansion of an industrial model, worldwide, that is increasingly more cost effective and doesn’t pay for fuel could (and should) accelerate. That leaves the potential for a Schumpetarian wave of creative destruction and mass obsolescence that may well obliterate the remaining coal industries of the world, the towns and regions that depend on them, the oil industry, oil exporting nations, the Petrodollar arrangement that still underpins the $US as global reserve currency and the geopolitics of oil that has driven most of the wars of the last few decades.
I think that might be the kind thing that JP Morgan is be a bit worried about with their reference to the “premature scrapping of some of the capital stock as policy and technology change”. Most of that would be ” happening at the micro level” and without proper guidance from governments at “the macro level” the whole thing could be very disruptive to say the least. Maybe the free marketeers at JP Morgan are looking to expand the role of govt. a little. Markets can be so chaotic.
https://www.abc.net.au/news/2019-09-12/is-renewable-power-cheaper-than-coal-nuclear-malcolm-turnbull/11495558
https://www.lowyinstitute.org/the-interpreter/book-review-chance-actually-change-climate
https://www.macrobusiness.com.au/2019/04/labor-co-invest-return-car-industry/
Markets are going to be very chaotic
And there is going to be a massive call for QE to bail them out….
I guarantee it
Yes,
This is where the case for a carbon price or accounting mechanism develops a whole new aspect. An appropriate mechanism would see a slow, orderly transition. Without the mechanism the obsolete dirty producers will just sit there and keep going until a certain price threshold is reached or a sudden innovation appears in the new technologies and just smashes the old producers into oblivion – rapidly. Then chaos and mass disruption ensues.
Its all quite avoidable.
I suggest sustainable cost accounting does the same thing without the artificial imposition of a carbon market
I’m concerned about the premature scrapping of capital investments,
there’s a lot of embedded energy in some of these installations and replacing them means generating a lot of co2 in making steel and cement for the new thing,
what I think is vital is that when replacement is due a very well thought out project is built with view to a long enough ‘low carbon’ service life to offset it’s constructions emissions,
the biggest energy/carbon investment humans make is home building, these need to be built to be super energy efficient and last a good 100 years,
those concrete tower blocks built after WW2 emitted huge amounts of carbon in construction and in making cement & steel, they were torn down after 30 yrs, I don’t think any of them were double glazed or insulated.
American suburban McMansions are vast, costly to heat and air condition and built out of crap, they blow away in a tornado!
what really irks me is people were happy driving 3/4 tonne hatchbacks and 1 tonne saloons in the 1980’s & 90’s, now they have replaced those capital investments with 2-3 tonne SUV’s, it’s insane,
and there’s hundreds of millions of them all over the planet, they’ll saturate the secondhand market for a decade or so even if we stopped building them today.
now they want to replace all of them with EV’s?
no one considers how much plastic is used in cars these days,
yaay let’s go green and buy yet another car made largely of plastic and run it on electricity generated by natural gas and coal,
my… won’t I look virtuous : )
in the 1980’s a volvo estate lasted 19yrs, todays passenger cars last about 9 years, I suspect EV’s will become junk after about 6 yrs,
we can’t consume our way out of this problem, it was caused by over consumption in the first place!
I agree with you
As the driver of an already oldish Volvo estate that has at least 100,000 miles of life left in it the greenest thing to do is use it until it drops
We may well have the technology, or some of it, but we don’t have the leadership. The world’s de facto leader is a climate-change denying narcissist with little grasp of reality.
No point worrying about the unknown unknowns, when there’s the known unknowns which could be catastrophic, such as when the major ice-shelves might collapse, or if pollinating insect populations collapse, or some as yet unidentified tipping point occurs setting in motion irreversible climatic change. Then there’s freshwater issues, soil depletion/erosion and loss of fertility…and, currently in the news, lethal pandemic.
I wonder if net-zero, though necessary, is sufficient.
It’s a start
“As the driver of an already oldish Volvo estate that has at least 100,000 miles of life left in it the greenest thing to do is use it until it drops”
No it isn’t..the greenest thing is not to use it and walk, cycle or use public transport and live with the inconvenience.
And sometimes as yet that’s quite hard
I hope that will change
But I do live in the real world
Written on a train
And I will then cycle home…..