Errors in estimates of the aggregate economic impacts of climate change – Part III

In previous commentaries on 2 April and 15 April, I described my ongoing efforts to have some small but significant errors corrected in three papers by Professor Richard Tol and in a Chapter on which he is a Coordinating Lead Author of the contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.

Professor Tol has now updated and corrected some, but not all, of the errors in two of his journal papers. These amendments also have important implications for the IPCC report.

First, the ‘Journal of Economic Dynamics and Control’ published ‘Corrigendum to “Targets for global climate policy: An overview”’ by Richard S.J. Tol. This noted that the original published version of the paper, published in 2013, wrongly cited a paper by Hope (2006) as finding that warming of 2.5°C would have an impact on global welfare of +0.9 per cent of GDP. The corrigendum indicates that it should have been -0.9 per cent.

The corrigendum provides a revised version of Figure 1 from the original paper using the amended value for Hope (2006), along with a correction to the calculation of the upper bound of the confidence interval and a further correction to the caption.

Unfortunately, no further corrections to the original paper were included in the corrigendum. It did not correct the mistaken value attributed to Nordhaus (1994) or to Nordhaus (2006). And no corrections were made to Section 7.3 or to Figure 8.

I have pointed out these outstanding errors to Professor Christopher Otrok, one of the editors of the journal. I also asked him again to make available the details of the aggregations by Professor Tol. Professor Otrok did not acknowledge the uncorrected mistakes and simply stated: “I don’t have the calculations, you will have to get them from professor Tol”.

This was a disappointingly half-hearted attempt by Professor Tol and the journal to address the errors, particularly as the original 2013 paper was used as the basis for the text and figures on aggregate economic impacts in the Final Draft of the IPCC report.

However, Professor Tol appears to have made more of an attempt, albeit not entirely successful, to correct the errors in his 2009 paper with the publication last week by the ‘Journal of Economic Perspectives’ of ‘Correction and Update: The Economic Effects of Climate Change’.

This corrigendum also amended the value attributed to Hope (2006) to -0.9 per cent of GDP, while also changing the estimate attributed to Plambeck and Hope (1996) to -2.5 per cent of GDP instead of +2.5 per cent.

For Nordhaus (2006), the corrigendum made an incomplete correction. The original paper by Tol (2009) cited Nordhaus (2006) as finding an impact of -0.9 per cent of GDP for warming of 2.5°C. In fact, Nordhaus (2006) provided estimates for a warming of 3.0°C. The additional material accompanying the Tol (2014) correction lists an estimate for Nordhaus (2006) for warming of 3.0°C. Sadly, Table 1 of the correction still wrongly lists Nordhaus (2006) as providing an estimate of impacts for warming of 2.5°C, alongside an estimate, not included in the original paper, of an impact of -1.1 per cent of GDP for a warming of 3.0°C.

Unfortunately, Table 1 of the Tol (2009) correction also lists the wrong value for Nordhaus (1994b), like the original paper.

The Tol (2014) correction provides a revised version of Figure 1 reflecting the incompletely amended data along with the additional estimate from Nordhaus (2006) and a further result from Nordhaus (2008). The least squares fit, as in Figure 1 of the original paper, still suggests net positive impacts for warming of up to about 2°C.

In addition, the correction includes five further data from four studies, on top of the extra results from the two Nordhaus studies, listed in Table 1 and plotted in Figure 2. Disappointingly, not all of these data are correct. They include two estimates attributed to a paper by Roberto Roson and Dominique Van der Mensbrugghe on ‘Climate change and economic growth: impacts and interactions’, which was published in 2012 in the ‘International Journal of Sustainable Economy’. The Tol (2014) correction suggests that the estimates apply to a warming of 2.9°C and 5.4°C. In fact, as I pointed out in my previous commentary, the correct figures are 2.3°C and 4.8°C.

The Tol (2014) correction plots all 21 estimates, including the erroneous data, in Figure 2, and the least squares fit yields a very different result from Figure 1. The one data point, attributed to Tol (2002), which suggests significant net benefits from warming is shown to be an outlier and the least squares fit indicates no net benefit for any warming. This finding is highlighted in the text of the Tol (2014) correction, which states: “unlike the original curve (Tol 2009, Figure 1) in which there were net benefits of climate change associated with warming below about 2°C, in the corrected and updated curve (Figure 2), impacts are always negative, at least in expectation”.

This is an important revision which has a major implication for the IPCC report. Table 10.B.1 and Figure 10-1 feature 20 of the 21 data points presented in the Tol (2014) correction in the ‘Journal of Economic Perspectives’. Section 10.9.2 of the IPCC report refers to the Table and Figure, but incorrectly states: “Estimates agree on the size of the impact (small relative to economic growth) but disagree on the sign (Figure 10-1). Climate change may be beneficial for moderate climate change but turn negative for greater warming”.

It is to be hoped that the final published version of the IPCC report will be free of erroneous data and interpretations.

In addition, this major revision by Professor Tol exposes the inaccuracy of the article by Viscount Ridley in The Spectator which, based primarily on the original Tol (2009) paper, falsely claimed that “climate change has done more good than harm so far and is likely to continue doing so for most of this century”.

The Tol (2014) correction also suggests that the updated Figure 2 shows “damages do not accelerate as fast for more pronounced warming”, and cites extrapolated figures for warming of 5°C. However, this conclusion depends on the curve fitted to Figure 2, which is inaccurate because of the errors in the plotting of the data, particularly for Roson and Van der Mensbrugghe (2012).

I have drawn the attention of the ‘Journal of Economic Perspectives’ to the outstanding errors in the Tol (2014) correction and update, and again requested that it makes available the details of the aggregations of other authors’ work performed by Professor Tol.

I will shortly be submitting a paper to the journal ‘Environmental and Resource Economics’ as it has chosen not to publish any correction to Tol (2012) (see previous commentary).

Bob Ward is Policy and Communications Director at the Grantham Research Institute on Climate Change and the Environment at London School of Economics and Political Science.