Recalibrating Climate Risk: New report urges governments and investors to fix 'faulty radar' in climate damage models
chris....@btinternet.com
All,
See this report from the University of Exeter - https://greenfuturessolutions.com/news/recalibrating-climate-risk/.
Chris.
Clive Elsworth
Thanks Chris, looks like a much needed report.
Here is a concise summary [from Deepseek] of the report "Recalibrating Climate Risk" (Abrams, Hu, & Dickenson Bampton, 2026).
Core Argument
The report argues that current economic models (especially "damage functions" used in climate economics) systematically underestimate the economic and financial risks of climate change. This disconnect between climate science and economic modelling misleads policymakers, financial regulators, and investors, leading to dangerous complacency.
Key Findings from Expert Elicitation (68+ climate scientists)
- Extremes, Not Averages, Define Risk: Using global mean temperature and GDP as primary metrics is highly inadequate. Local extremes (heatwaves, floods, droughts) drive real-world damages, not gradual global averages. GDP can even rise after disasters due to reconstruction spending, masking true wealth destruction.
- Non-Linear & Cascading Damages: Climate damages do not follow smooth, linear curves. They involve thresholds, tipping points (e.g., Amazon dieback, ice sheet collapse), and cascading effects (e.g., heatwave → crop failure → food price spike → unrest → migration). Current models miss these chain reactions.
- Uncertainty Widens with Warming: Standard models assume constant uncertainty. Experts say the opposite: the hotter it gets (beyond ~2°C), the less certain we become about outcomes, yet the potential consequences grow far worse.
- GDP is a Poor Metric: GDP ignores mortality, inequality, cultural loss, ecosystem damage, and social disruption. Experts strongly recommend complementing GDP with metrics like mortality rates, health burdens (DALYs), inequality (Gini), and the Genuine Progress Indicator (GPI).
- Collapse Thresholds Exist: Experts estimate a median economic/societal collapse threshold around 4°C (range: 2.1°C to 5.4°C). Critically, 36% of experts place the threshold below 4°C, meaning current policy trajectories (2.7°C) carry a material risk of catastrophic, non-survivable economic outcomes.
Major Problems with Current Damage Functions
- Over-reliance on GDP: Misses real welfare and can count destruction as growth.
- Linear/Quadratic Shapes: Cannot represent tipping points, thresholds, or collapse.
- Ignore Cascading Risks: Fail to model how shocks propagate through supply chains, finance, and geopolitics.
- False Precision: Provide single "best estimate" numbers when true uncertainty spans orders of magnitude.
- Assumption of Endless Growth: Even severe damage scenarios assume positive GDP growth continues, not absolute decline.
Proposed Improvements
Direct Improvements (near-term, implementable):
- Temperature-stratified functions: Calibrate damages at specific warming levels (1.5°C, 2°C, 3°C, 4°C) using expert judgment.
- Collapse threshold distributions: Explicitly model the probability of economic collapse at high temperatures.
- Ensemble of functional forms: Use multiple mathematical forms (logistic, Weibull, etc.) and report ranges, not point estimates.
Indirect/Complementary Improvements (longer-term):
- Move beyond GDP to multi-metric welfare indicators.
- Use process-based models that track capital destruction, labor productivity, and sectoral dynamics.
- Incorporate stochastic extreme events and tipping point jumps.
- Improve spatial (local/regional) and temporal (daily/seasonal) resolution.
Implications for Different Actors
For Financial Regulators & Central Banks (NGFS):
- Climate change is a core financial stability risk, not just a micro-prudential issue.
- Stress tests must move from median pathways to tail risks, extremes, and compounding effects.
- Report ranges, not point estimates; acknowledge where models cannot reliably quantify outcomes.
For Institutional Investors & Pension Funds:
- Fiduciary duty cannot be fulfilled using narrow financial metrics alone; climate destabilizes the very societies beneficiaries retire into.
- Diversification cannot fully hedge systemic climate risk (correlated losses across all assets).
- Portfolios should be stress-tested against collapse scenarios, and mitigation should be treated as risk reduction, not just ethics.
For Economic Advisory Agencies & Scenario Providers:
- Single "best-estimate" projections are misleading; present probabilistic ranges.
- At >2°C, structural uncertainty (disagreement on system behavior) dominates, not data gaps.
- Explicitly acknowledge the limits of models at high warming levels.
Conclusion
The report calls for a paradigm shift: from optimizing based on "most likely" outcomes to managing for tail risks and collapse avoidance. The appropriate response is not to wait for perfect models, but to recalibrate governance toward precaution, robustness, and transparency – treating even low-probability catastrophic outcomes as unacceptable risks.
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David Spratt
rob...@rtulip.net
Hi Chris, thanks for sharing this report. I have read the Foreword by Mark Campanale and found it a very strange analysis, but sadly typical of prevailing failed climate orthodoxy.
I agree with all the facts presented, but the main policy proposal, “leaning into decarbonisation”, has no prospect of success. It is not going to happen in the short term, regardless of booster efforts, and even if it did, it would have marginal climate benefit. A widespread conservative literature treats decarbonisation with derision, due to its perceived harm to prosperity. Even though this literature is often scientifically wrong, it also makes many valid points that are ignored by the scientific community. See for example https://stopthesethings.com/.
In this context, a serious effort to recalibrate climate risk should entertain the scenario that it will prove impossible to manage heat by manipulating carbon, in which case other strategies should be assessed. But in line with past efforts from academia, the benefits of the main alternative policy, restoring albedo, are simply ignored. My search of the report found no relevant terms.
Treating risks such as AMOC with decarbonisation invites the introduction ‘elephant, meet flea’, an extreme mismatch of problem and solution.
Campanale assumes that scientists are correct in their debates with economists over climate policy. A more humble approach might explore the possibility that the science community has wildly overestimated the mitigation potential and feasibility of carbon action. To “accelerate investment for a new climate secure energy system” is not a climate policy at all, gobbling up resources that should be used to cool the Earth.
Regards
Robert Tulip
From: chris.vivian2 via Healthy Planet Action Coalition (HPAC) <healthy-planet-...@googlegroups.com>
Sent: Saturday, 18 April 2026 12:24 AM
To: 'Chris Vivian' via Healthy Planet Action Coalition (HPAC) <healthy-planet-...@googlegroups.com>
Subject: [HPAC] Recalibrating Climate Risk: New report urges governments and investors to fix 'faulty radar' in climate damage models
All,
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