Economists slam Deloitte climate report for 'misleading' modelling

29 September 2020 Consultancy.uk

A controversial Deloitte study has come under fire, after alleging that the warming of temperatures across the world could generate an economic boost to some 70 countries in the coming decades. The report has been labelled as “misleading” and “perfectly insane” by a host of climate experts, while its methodology has been branded as “woefully inadequate.”

The richest 1% of people in the world produce more than double the carbon emissions of the poorest half, according to a recent study by charity Oxfam and the Stockholm Environment Institute. The report found that the planet’s wealthiest people have a significantly greater impact on climate change compared to the 3.1 billion of the world's poorest people, with the world’s richest 10% accounting for 52% of worldwide emissions between 1990 and 2015. Now, another report from Deloitte’s Czech wing suggests those same people may be poised to cash in on the crisis they helped create.

According to a paper from the Big Four’s Czech team, due to its cooler climate, the nation formerly known as the Czech Republic is somehow poised to benefit from any increase in emissions, no matter how intense. Similarly, some 70 countries – including a number of the world’s largest polluters and richest economies – stand to ‘benefit’ from higher temperatures. These include fellow cold climate countries Russia, Canada, Mongolia, Norway, Tajikistan, Sweden, Iceland and North Korea among the others.

Economists slam Deloitte climate report for 'misleading' modelling

On the other hand, however, Deloitte did admit that nearly 130 countries stand to face negative economic consequences from climate change. The worst affected appear to be the hottest and poorest – with Deloitte listing a number of Middle Eastern and African countries such as Mali and Sudan, as those which stand to lose the most from global warming. The alarmingly casual assertion suggests that Syria – whose civil war can trace its roots to a historic drought – will be only the tip of a new iceberg of climate refugees, whom richer nations will continue to work to keep outside their borders, regardless of their role in climate change.

Perhaps anticipating that crowing about Czechia’s economy’s fortunate geographical positioning in this context might be seen as slightly tone-deaf, Deloitte also issues an accompanying statement that climate change doubtless remains a pressing issue, and will have far-reaching repercussions. Speaking to the Czech News Agency, Deloitte Director and co-author of the report David Marek added that climate change “has far-reaching adverse effects on natural systems and human society,” and that at the economic level, climate change “primarily affects agricultural production.”

Regardless of that, the Big Four firm has predictably been panned for its release, with experts suggesting that Deloitte’s “naïve” modelling that positions the likes of Czechia to benefit from climate change overlooks a number of detrimental factors that are not considered by the analysis. For example, an IMF working paper recently projected global economic damages of 7% of GDP this century with high emissions, something which would see the Czech economy shrink by 4.5% – something the author described as “conservative estimates.”

A study in the journal Nature Climate Change also found that high emissions would reduce the size of the global economy 6.6% this century, with much less damage under lower emissions, while elsewhere, analysis by Oxford Economics projected that the global economy would be 21% smaller by 2100 with continued emissions. Pointing to the vast body of research which refutes Deloitte’s regional claims, Dr Gernot Wagner, Associated Professor in Climate Economics at New York University, did not mince his words in regards to “the perfect example of a seemingly logical "study" that is also perfectly insane.”

Wagner went on, “One-size-fits-all analyses like these, based around a globally optimal temperature, don’t truly judge climate risks -- neither what we know, nor the uncertainties around what we don't. The greatest risks from climate change aren’t about changing averages, bad though those are. Potentially much more significant are weather extremes, like killer heat. And equally important, climate is a global phenomenon. No country is an island, including the Czech Republic.”

Simply absurd

A host of other leading figures in climate science objected to Deloitte’s conclusions. These included Tomáš Jungwirth, leader of the climate team at the Association for International Affairs (AMO) Research Center – who lambasted “the idea that the world lacking drinking water, missing basic food supplies, plagued by extreme weather, where the entire countries are collapsing, and hundreds of millions of people have lost their homes” as being one where Czechia thrives as “simply absurd" – and Dr Milan Scasny, Head of the Department of Environmental Economics at Charles University.

Scasny stated that due to the interconnectedness of economies and the "spillover" of effects, especially in the EU, it remains “unlikely that fixed effects for countries and time will capture all other effects that the study authors did not include in the regression model among the explanatory variables.” Professor Tim Lenton, Professor of the Global System Institute at the University of Exeter also took aim at Deloitte’s selective methodology, meanwhile, labelling it as “misleading.”

Lenton explained, “Calculating the effects of climate change purely on the basis of changes in mean temperature (or mean rainfall) altering GDP is naïve and misleading – as anyone already suffering from extreme events will tell you. Add to that the evidence that we are already passing tipping points in the climate system at around 1C of global warming, and the use of statistical models based only on past experience looks woefully inadequate. Climate change is the most profound risk management problem humanity has ever faced. It demands the best risk advice, not misleading analyses like this one.”


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