September 28, 2013

Gambling at 19-1

The IPCC report is out. We know the earth has been getting hotter: that’s just simple data analysis. The report says

It is extremely likely that more than half of the observed increase in global average surface temperature from 1951 to 2010 was caused by the anthropogenic increase in greenhouse gas concentrations and other anthropogenic forcings together. The best estimate of the human induced contribution to warming is similar to the observed warming over this period. 

Here, “extremely likely” is defined as 95-100% confidence. Since we (fortunately) don’t get a long series of potential climate catastrophes to average over, the probabilities have to be interpreted in terms of (reasonable) degrees of belief rather than relative frequency, which can be made concrete by equivalents to investment or gambling.

That is, the panel concludes no-one should be betting against a human cause for climate change unless they get better than 19-1 odds (and possibly much better, depending on where in the 95-100% range they are).  Suppose we have an opportunity to reduce greenhouse gas concentrations, which will cost $20 million, and that the money is completely wasted if the climate models are basically wrong, but which will bring in $21 million, for a $1 million profit, if the models are basically right. The evaluation as “extremely likely” means we should take these opportunities.  Investments that have, say, a net loss of $10 million if there isn’t anthropogenic warming and a net saving of $1 million if there is, are very good value.  For mitigation efforts, the odds are even more favourable: the world unquestionably has been warming, so mitigation is likely to be worthwhile even if the reason isn’t CO2.

I don’t think current policies are anywhere near the 19-1 threshold. I’d be surprised if a lot of them even made sense  if the climate was offering even money.



Thomas Lumley (@tslumley) is Professor of Biostatistics at the University of Auckland. His research interests include semiparametric models, survey sampling, statistical computing, foundations of statistics, and whatever methodological problems his medical collaborators come up with. He also blogs at Biased and Inefficient See all posts by Thomas Lumley »


  • avatar
    Joseph Delaney

    I am surprised that global warning is so controversial. I grew up in Canada in the “acid rain era” (such simpler times) and so I guess I am used to the idea that the sheer volume of coal being burned can have knock-off effects.

    The hard questions seem to be to be political and economic. How do we intervene in the face of a strong collective action problem and powerfully entrenched interests?

    I remain amazed by why we don’t push much, much harder on things like solar efficiency (seems useful no matter where the maximum is or the climate change outcome) and nuclear safety (again, in the absence of a complete ban on these plants, it seems worthwhile even if all of climate change was a statistical fluke).

    But it seems like sensible actions are discouraged because they would make adaption easier of climate change is actually happening, even if they are arguably good ideas in the absence of climate change.

    10 months ago Reply

  • avatar
    Jason Felix

    Thanks for the clear exposition Thomas.

    I wonder to what extent such calculations should play in decisions to leave NZ’s petrochemical reserves where they are; particularly methane hydrates should their extraction ever prove practical.

    Joseph, I think you’re remembering with rose coloured-glasses :).

    IIRC At the time, acid-rain was just as contentious as climate change is now, e.g.,

    That it ended happily is cause for some hope I suppose.

    10 months ago Reply

    • avatar
      Thomas Lumley

      I don’t know enough about specific energy technologies to say much on that. I do evidence and uncertainty, I don’t do geology or chemistry or power engineering. Methane hydrates are especially tricky because they might escape spontaneously.

      10 months ago Reply

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