PIK’s (Naive) New Deal – Based On A “State-Of-The-Art Model Of Climate Economics”

Although the Potsdam Institute For Climate Impact Research (PIK) gives the impression that it is a climate research facility, it also appears to have become an institute for formulating novel economic policy.

H/t: reader Ike

The PIK, commissioned by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, has produced and released a NEW SYNTHESIS REPORT that claims Europe can revitalize its economy by tackling the climate challenge, namely by raising the European climate target for emissions reductions from 20% to 30%. The report is titled:

A New Growth Path for Europe – Generating Prosperity and Jobs in the Low Carbon Economy”

Tipping point to prosperity at 30%

The PIK seems to be claiming there is an economic tipping point to prosperity at 30% emissions reduction. The onlineDie Zeit writes on the new PIK report:

Europe should reduce its greenhouse gas emissions by 30% instead of only 20% by 2020, which is the current plan. This is how the continent could overcome its economic stagnation.

If they stick to the 20% target, ‘then it would be like someone stuck in a hole who is digging deeper’.”

Based on climate-economic models!

The PIK claims a 30% reduction by 2020 would lead to higher growth and increased employment. These projections are based on “new model results”. (PIK models have an incurable habit of producing exactly what the PIK wants to see).

In the coming decade, Europe will need to accept the challenge of increasing economic growth while reducing both unemployment and greenhouse gas emissions. New model results show that these three goals can actually reinforce one another.”

Yet, there must be something terribly wrong with their models because a slew of European governments have been recently forced to do just the exact opposite, due real-life economics, and scale back subsidies to money-losing  green energy sources – especially solar.

But the PIK has never been deterred by the harsh truths of reality, and claims:

Clear policies associated with a decisive move to a 30% target can be doubly beneficial for the climate and the EU economy.”

Their “new model results” also say their new plan would:

• increase the growth rate of the European economy by up to 0.6% per year.
• create up to 6 million additional jobs Europe-wide.
• boost European investments from 18% to up to 22% of GDP.
• increase European GDP by up to $842 billion (2004 dollars).
• increase GDP by up to 6% both in the old (EU15) and new (EU12) member states.”

For the first time in the academic modelling field

The above projections all sound so rosy. So just exactly what kind of brilliant mastermind plan did the PIK use to produce such rosy projections? (Hang on to your chair!):

For the first time in the academic climate modeling field, the present study has taken a state-of-the-art model of climate economics and enhanced it along those lines. The enhanced model includes:

• the fact that investments depend on subjective expectations, not on correct previsions of whatever future possibilities may arise.
• the fact that higher investments trigger higher learning-by-doing, thereby reducing unit costs.
• the resulting existence of different possible equilibria with different growth paths.

The new simulations show that 30% is achievable and can be economically beneficial by shifting the European Economy into a new, more advantageous equilibrium – a path of low-carbon growth.”

I don’t know about you, but I’d be a little wary of the “first-time in the academic climate modeling field” point, especially in a field as complex as economics. Thinking that these things work without glitches after just one tune-up sets a new standard in naiveness.

Apparently I’m not the only one who’s palm over face on this. Even Germany’s greenie Environment Minister Norbert Röttgen is not touching this with a 10-foot pole. According to Die Zeit:

Even Environment Minister Norbert Röttgen has placed little emphasis on the presentation of the new study: Instead of travellingng to Brussels himself, he sent his secretary Katherina Reiche.”

Like the old promises of government central planning, PIK’s plan is a roadmap to a disaster.

8 responses to “PIK’s (Naive) New Deal – Based On A “State-Of-The-Art Model Of Climate Economics””

  1. mindert eiting

    Because PIK (in Dutch a word for the male sex organ) develops a theory of everything, they may also install a task force of psychiatrists, studying the impact of climate models projections on our mental health.

  2. Adolf Balik

    It is exactly the same stupidity like if they wanted increase a production of inundation civilization – like ancient Egypt or Mesopotamia – by decreasing consumption of inundation water or production increase of agrarian medieval economy by decreasing used soil acreage. Consumption of primary energy is the determining production factor of industrial age. The planet Earth GDP is equal to consumption of primary energy. $1 US adjusted to prices 1990 is produced by 9,7 mW * year ± 0,3 with 95% level of confidence, which is traceable for so about 30 – 40 years back. There is no such way to higher prosperity without higher accessibility of cheap energy!

  3. DirkH

    I don’t hold my breath for German economists to pull this apart – we have no noteworthy economists i know of… but i would love to see the guys from http://www.masterresource.org/
    or Ross McKitrick pull this apart.

    Oh, and if even Röttgen – the nuttiest of the current ministers – doesn’t touch this, then it looks like the current government really starts to distance themselves from these “We-can-prove-anything” computer modelers.

  4. R. de Haan

    No, further investments in Green renewable energy will kill our economies and cause an immediate world crises, what do I say, the crises already has begun.

    Oil went up 10% today. The same of course goes for food.

    The Green Tech is accelerating the use of our resources and hiking prices of everything we need to survive.

    These people should be [-snip].

  5. R. de Haan

    I go for SNIP too.

    In the mean time this report from Harold Ambler called “Playing Climate Games:

  6. mindert eiting
  7. Marcus Kesseler

    I like it!

    I mean, you have to admit, these guys got balls!

    The idea of taking two non-linear, interacting, chaotic, multi-level system models and unifying them into one integrated model has something almost magical about it. The amount of sheer FAITH you have to have in your modelling! I mean, WOW.

    Makes me feel like sitting down, smoking something really cool, go into trance and say ‘ommmm’ in a very deep voice.

    Impossible stuff feeding back into more impossible stuff and back from there again. Has an Escher-like quality to it.

    This idea reminded me of one of my favorite Douglas Adams quips:

    “If you’ve done six impossible things this morning, why not round it off with breakfast at Milliways, the Restaurant at the End of the Universe.”

    Hope these guys are enjoying their breakfast…


    1. DirkH

      Especially considering that they certainly know even less about economy than about climate. They can only hope to get away with such drivel in the EU.

      I’ve given up hope on German economists completely… the ftd posts one project syndicate piece after the other and becomes more useless by the day…

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