Sleepwalking into the storm

A perverse economic logic is bringing the climate crisis and extreme weather ever nearer.

Over the weekend, I was sitting in a park in New York City. I was not wearing a jacket because it was hot – 25°C, in fact, which a quick internet search tells me is ten degrees warmer than the historical average for the last 30-odd years. Around me, the trees were arranged in disagreement, some a dark summer green, others half bare. The attire of my fellow park-goers was similarly confused. Were you to ask someone, based on a photograph of the scene, what season it was, they would find it nearly impossible. It was a day that felt like it existed outside of time.

Unseasonable days happen, and a single day’s weather tells us nearly nothing about our warming world, despite the frequency with which media headlines tout heatwaves or cold fronts as proof that climate change is or is not really happening. But this was not a day that stood in isolation – far from it. Earlier this year, scientists confirmed that global average surface temperature had stood higher than 1.5°C above the pre-industrial average – the target established in the 2015 Paris Agreement – for 12 consecutive months. The effects are already felt. With parts of the Eastern Seaboard still reeling from Hurricane Helene, Storm Milton, a category five storm that has been described as “the hurricane that scientists were dreading”, now bears down on Florida. Among other devastation, Milton could force water levels in the Tampa Bay area an astonishing 15 feet about ground level. And though extreme storms are a mainstay of the planet’s natural variation (it is speculated Milton could be the strongest for a century), they are becoming more frequent, and more destructive, as the climate warms. According to World Weather Attribution, a team of scientists leading on rapid response analyses of extreme weather, climate change has so far made storms like Helene at least twice as likely.

When the reports of 12 months beyond 1.5°C landed, they did so with relatively little fanfare. One month later, in March 2024, the US Energy Information Administration published a brief with the headline: “United States produces more crude oil than any country, ever” in celebration of the country’s 2023 boom, a year that also saw oil become the United States’s number one commodity export for the first time in history. Despite the admission of the International Energy Agency in 2021 that there can be no new oil and gas development to have a chance of meeting our global targets, 2023 saw a sharp resurgence in new licenses for extraction and development, led by the world’s wealthy Western countries. Many of these new investments are made with the anticipation that the oil and gas will be exploited long into the future, often decades beyond the global target of net zero by 2050. This is cognitive dissonance on a ruinous scale. How have we come to live with it?

According to a new book by Andreas Malm and Wim Carton, the answer lies in a simple but radical idea: overshoot. While we tend to think of temperature thresholds like 1.5 or 2°C in terms of a linear upward progression, the idea of overshoot turns this on its head, contending that the optimal – if not only – path to meeting global targets is more parabolic. The idea is that we can temporarily admit defeat and allow global temperatures to breach 1.5 or even 2°C of warming, before getting our act together at some unknown point thereafter and, with the benefit of carbon removal technologies, bringing the concentration of emissions in our atmosphere back to a suitable level. In Overshoot: How the world surrendered to climate breakdown, Malm, a theorist, and Carton, a professor of sustainability science, take aim at the concept. Portrayed by the authors as a subtle yet profoundly radical break with the carbon budgets and firm targets that dominated policy discussions for years, acceptance that we will now travel through some degree of overshoot en route to a more stable climatic future has quietly become the mainstream position. How and why this happened is the primary subject of Malm and Carton’s inquiry.

In 2019, the Intergovernmental Panel on Climate Change published a Special Report on 1.5^°C of warming, prompted by the Paris Agreement. The document sounded a deafening alarm on the dangers of surpassing the 1.5°C threshold. Approaching 2°C and beyond, the risks – extreme temperatures, drought, ocean acidification, sea level rise, and biodiversity loss, to name a few – increase substantially. However, when it came to the question of how we might meet the 1.5°C target, the dissonance was striking: of the 578 scenarios cited by the report, just ten entailed actually limiting warming to 1.5°C – the remaining 568 deliberately overshot the target. As Malm and Carton underscore, the report therefore “did two things simultaneously: it described just how dangerous an exceedance of 1.5C might be, and it consecrated the notion of overshoot”.

According to Malm and Carton, the idea of “overshoot” first appeared in a 2003 report commissioned by the OECD, in which the author argued that “in principle it may be advantageous to follow an ‘overshoot’ pathway for any target”– a claim that immediately raises the question: advantageous in what sense? The answer, overwhelmingly, is economic. The overshoot pathways now central to the reports and plans and governments and the IPCC are derived from “Integrated Assessment Models” (IAMs), so named because they attempt to integrate climate science and economics to assess, for instance, the economic impact of different degrees of global warming, or how we might hit a given target at least-cost. In his 2018 acceptance speech for the Nobel Prize for his work on climate economics, William Nordhaus, father of the IAM, described global average temperature rise of 4°C as “optimal”. He did so based on his modelling, presented in a subsequent paper, that warming of 3°C would decrease global economic output by just 2%, or, remarkably, by just 8% at a truly scorching 6°C. For scientists, by contrast, a 4°C-warmer world looks straightforwardly catastrophic or, in the choice words of scientist Kevin Anderson: “incompatible with an organised global community”.

How to account for the difference? Nordhaus’s results derived from the “DICE” (Dynamic Integrated Climate-Economy) model, an early IAM, for which he was awarded the prize. While the model has seen several developments and iterations over the years, that it would suggest “optimal” warming in the 3-4°C range as recently as 2018 reflects the extent of abstraction and status quo economic bias on which IAMs are built. To take one particularly striking example: in one of his earlier efforts to assess impacts in the United States, Nordhaus excluded nearly 90% of the US economy on the basis that the omitted sectors operate in “carefully controlled environments” – in a word, indoors. Sectors predicted to experience “negligible effects” from climate change included manufacturing, insurance, and real estate.

To pick apart the assumptions in models obscure to most people might seem inconsequential – a model is, after all, just a model, and all are based on varying degrees of abstraction and subjective choice. However, the problems with and impacts of IAMs extend far beyond the work of one prominent economist. They are, to borrow from Malm and Carton, “drenched in non-innocent ideological positions” reflecting mainstream economic doctrine. These include the assumption that action on climate should be incremental or gradual, that radical economic transformation is either virtually impossible or inherently undesirable, and that the essential feature of a mitigation pathway should be cost effectiveness. The effect is to produce a range of scenarios in which the global economy as it is currently organised is preserved, even as temperatures rise and the consequences mount.

Perhaps the most philosophically profound assumption baked into IAMs is the devaluation of the future. A dollar today, the economic logic goes, is worth more to us than a dollar tomorrow. Just how much more depends on the “discount rate”. The higher the rate, the faster the value of something in the present falls to zero. A discount rate of zero affords the same value to the future as it does the present, while high discount rates imply that we should weigh the future impacts of our decisions far less than their present costs. Discounting is simultaneously among the most standard practices in economics, and its most feverishly contested. In the 2006 Stern Review on the Economics of Climate Change, economist Nicholas Stern proposed using a discount rate near zero, arguing that we must “treat the welfare of future generations on a par with our own.” It was a move that drew the ire of many in Stern’s discipline, including Nordhaus, who argued that the standard and appropriate practice was to set the rate at the return on capital observable in the real world, a proxy for the rate by which future generations will inevitably become richer and, by extension, more capable of dealing with the problem.

In the context of an accelerating climate crisis, deepening geopolitical tensions and increased risk of shocks like global pandemics, the assumption that strong and steady economic growth will continue apace is increasingly hard to defend. But as Malm and Carton argue, even if we were to take it as true, it is a premise with obviously troublesome implications: perpetual growth implies it will always be cheaper to address challenges in the future, absolving us in perpetuity if it is sufficiently costly to act in the present. The longer we delay action on the climate crisis – expanding new fossil fuel investments and emitting unabated – the steeper the slope to safety becomes. By the time of the Paris Agreement, the path already resembled a cliff edge; it has only become steeper since. Following this trajectory implies nothing short of a revolution – a complete root-and-branch transformation of virtually every part of how we organise our economies and, critically, the early retirement or “stranding” of fossil fuel assets.

This is where the idea of overshoot, and the discounting of the future on which it relies, really proves its worth. As Malm and Carton document, while “shopping around” in the early 2000s for an IAM that could deliver a feasible scenario for 2°C, the EU found IMAGE, a Dutch outfit whose scenarios ran through overshoot to deliver a relatively smooth transition requiring very little loss of value for the fossil fuel sector and, by extension, the financial system that owns and is owed by it. In fact, the scenario was explicit in its modelling: it chose a slow rate of emissions reductions because, by their own account, “fast reduction rates would require the early retirement of existing fossil-fuel-based capital stock, and this may involve high costs”. Indeed. While estimates vary, a 2020 analysis by the Financial Times found that to limit warming to 1.5°C, some 84% of known reserves would have to be forfeited. Through a technical sleight of hand, overshoot obviates the need to do so, simply by assuming that we will not meet the target in the first place.

Instead, most scenarios are built on a comfortable foundation of business as usual, followed by the widespread adoption of carbon removal technologies, notably “BECCS” (shorthand for the rather bulkier “bio-energy with carbon capture and storage”): a technology in which we create large plantations of biomass that, as it grows, draws down carbon, before being burned for energy in a facility with carbon capture capabilities. There, the carbon dioxide can simply be collected and injected underground, creating a (hypothetical) net-negative cycle. It sounds simple enough, except that the more committed we remain to business as usual, the more carbon removal will have to be deployed. The result is that most IAM pathways to 1.5°C allocate vast swathes of land to BECCS plantations – in some cases up to five times the area of India. For those that allocate less, the proliferation of other carbon removal technologies like direct air capture is required on a massive scale.

In either case, quietly and with little fanfare, the consensus in global policymaking on climate has become a commitment to wishful thinking and wilful blindness, of asserting that the idea of 1.5°C is still alive while disregarding the fact that virtually all plans for meeting climate targets will blow right past that threshold, propelling us into a truly unknown future and gambling that we will be able to turn the clock, effectively, in reverse. For many of us, this cognitive dissonance, once known, is difficult to accommodate. For economics, however, it is the modus operandi: the wellbeing of those in the future is, almost by definition, worth less than our own, and so prioritising the protection of economic value now is more than justified. And whether they are thinking about overshoot or not, the actions of the powerful – political leaders, fossil fuel firms, financial titans – reflect a firm belief in its inevitability. On the campaign trail, Kamala Harris continues to celebrate her role as champion of fracking, while the British Prime Minister produces op-eds maligning net zero “extremists” and touting carbon capture and storage.

This week, BP finally dropped its ailing plans to pare back production by 2030, while the sector as a whole is issuing new bonds maturing well beyond 2050, reflecting their belief in a thriving future for their industry. None of us can predict the future. But, from balmy autumn days to “once in a lifetime” storms that occur with startling frequency, we can detect something awry in the present. Some among us have outsized power to shape what is to come. At the moment, they are playing with fire. Last year, global carbon emissions reached a record high of 37.4 billion tonnes. So far, this year shows no signs of breaking with the trend. It is an inheritance of as-yet-unknowable impact that will haunt the inhabitants of this planet well into the future. Mercifully, in the bloodless abstraction of the average IAM, it is also of little consequence.