For a while now there has been a debate going on about how the Intergovernmental Panel on Climate Change out to project forward into time economic growth. Such projections are important for developing scenarios of carbon emissions that are used as input to climate models. The debate involves differences between market exchange rates (e.g., $1 = 1.26 Euro) and what is called Purchasing Power Parity, e.g., a Big Mac = $2.90 in the U.S. but only $1.26 in China. (On these differences see this article.)

This week The Economist reminds us why this debate matters for the issue of climate change.

“The IPCC’s forecasts of global output are based on national GDP converted to dollars using market exchange rates. They also bravely assume that most of the gap in average income between rich and poor countries will be closed by the end of this century, even while the rich continue to get richer. Because using market exchange rates overstates the initial gap in average income between rich and poor countries, this results in improbably high projections of GDP growth in developing countries, much faster than has ever been achieved before. As a result, the IPCC’s projections of future carbon emissions, on this basis alone, are probably overstated.

The IPCC claims that measuring at PPP or market exchange rates does not affect the economy any more than a switch from degrees Celsius to Fahrenheit alters the temperature. But the analogy is wrong. PPP and market exchange rates, unlike Celsius and Fahrenheit, are measuring different things. That should not be too hard an idea for scientists to grasp.”

(Those with deep interests in this topic can learn much more here, here, here, and here.)

A group of researchers in Norway explored what the implications would be if IPCC were to switch to PPP from MER. They found that, “the use of PPP instead of MER has significant effects on the emission development paths. In fact, the emissions in 2100 are reduced by 38 to 50 percent, depending on choice of scenario. However, due to the accumulative effect of emissions, the concentration of CO2 in the atmosphere is not to the same extent influenced. The CO2-concentration in 2100 is reduced by 16 to 24 percent in 2100. The projected temperature increases are lowered by 0.5-1 °C relative to the original SRES scenarios.”

While it is unlikely that the IPCC would switch growth metrics, it is not unreasonable to expect that it might in the future include scenarios based on PPP. If so, all else being equal, the inclusion of such scenarios would mean that the IPCC’s projected temperature range for 2100 would expand. And while the “global warming: yes or no” crowds would have plenty of fun with this, the real lesson would be that climate science, rather than moving towards deterministic predictions of the future climate, i.e., reducing uncertainty, is instead providing us with considerable knowledge about how uncertain the future actually is. Decisions about climate will have to be made in the face of profound, irreducible uncertainty.

Today, we know enough to act. But of course, the question that we face is: how to act? Fortunately, we know what to do, it just seems that doing it is the hard part.