Understanding Risks and Uncertainties in Energy and Climate Policy

Many modelling frameworks have been developed to provide an understanding of the drivers of climate change and to assist policy formation (Flamos 2016). When climate change emerged as a serious issue in the 1970s, there were no theoretical tools that could provide a more integrated understanding of the phenomenon or provide richer insights into policy response. Models of physical dimensions of the climate system (mostly ecosystem models) were extended to consider the processes by which greenhouse gas emissions were generated and could be limited. General circulation models that dealt with atmospheric parts of the climate system were being linked to ocean models. Economists were modifying global energy-economy analysis to project greenhouse gas emissions, considering ways to reduce them and incorporating aggregated physical dimensions of the climate system. Scientists from different disciplines were linking models and analyses to provide a more integrated understanding of different facets of a highly complex interrelated phenomenon (Weyant 2009). At a broad level, we can see the following interlinked chain of interactions. Human-induced climate change results from an increase in GHG emissions and their levels of concentration in the atmosphere. Climate science tells us how different concentration levels of GHGs may affect the temperature, precipitation, cloud formation, wind and sea level rise. These changes in turn result in various physical, environmental and social impacts like change in crop yields, water supply, species loss and migration. These impacts can then be translated into monetary terms, or processed through a model of the economy, to give a single measure of the economic cost of climate change. As these changes take place over time, models attempt to project parts or the whole dynamic process of increasing emissions, temperature changes, physical impacts and economic damages. The economy is not only affected by climate change, but it is also the perpetrator of climate change as growth in production and consumption gives rise to more GHG emissions. The most important part of the economy that determines the rate of emissions is the energy system or the forms and uses of energy. Each part of this climate-economy interaction is characterised by uncertainty (Papadelis et al. 2013) and some degree of scientific disagreement. Various ways of climate-economy modelling can to a large extent be understood by the different ways in which they model parts of this highly interconnected process. Figure 1 below provides a depiction of climate-economy dynamics, identifying four key modules of climate-economy modelling. The climate module describes the link between GHG emission, atmospheric concentrations and the resulting variation in temperature and other climatic changes (precipitation, cloud cover, extreme weather events, climate discontinuities, etc.).

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