Ian Castles, the well-known economist, has sent in the following post as a comment on another topic, which I have taken the liberty of posting up here. Ian writes:
During the past three years I and a co-author (David Henderson, former Head of the Department of Economics and Statistics at OECD) have criticised the IPCC’s treatment of economic issues.
Our main single criticism has been the Panel’s use of exchange rate converters to put the GDPs of different countries onto a common basis for purposes of estimating and projecting output, income, energy intensity, etc. This is not permissible under the internationally-agreed System of National Accounts which was unanimously approved by the UN Statistical Commission in 1993, and published later that year by the United Nations, the World Bank, the IMF, the OECD and the Commission of the European Communities, under cover of a Foreword which was personally signed by the Heads of the five organisations.
The practice of exchange rate conversion has been explicitly rejected by at least three Nobel Laureates in economics (Sir Richard Stone, Paul Samuelson and Amartya Sen) and three Distinguished Fellows of the American Economic Association (Irving Kravis, Robert Summers and Alan Heston). In the course of the current controversy, Sir Partha Dasgupta of Cambridge University has told Stephen Schneider of Stanford University, a leading IPCC figure, that “Castles is of course completely right” (in rejecting the use of “outmoded accounting practices”); William Nordhaus of Yale University advised an IPCC Expert Meeting on Emissions Scenarios last January that estimates of output or income using exchange rates are “simply wrong”, “constructed on an economically unsound basis”, “fundamentally wrong”, “highly misleading” and “precisely wrong”; Richard Tol of Hamburg University informed the recent UK House of Lords Committee inquiry into “The Economics of Climate Change” that the IPCC scenarios “essentially assume convergence based on market exchange rates, which is ludicrous”; Ross McKitrick of Guelph University drew the Committee’s attention to a statement by John Reilly of MIT that the IPCC scenarios exercise was “in my view, a kind of insult to science”; and the world’s leading expert on historical international comparisons of output and income, Angus Maddison, gave the Committee “an illustration of the implausibility of using exchange rate converters in historical analysis or futurology (as in the IPCC Special Report on Emissions Scenarios) In its unanimous report, the 13-member Select Committee on Economic Affairs of the House of Lords said that “We found no support for the use of MER in [long-term emissions scenarios], other than from Dr Nakicenovic of the IPCC.”
None of this criticism has moved the IPCC. Its Chairman, Dr Rajendra Pachauri of India, told the House of Lords Committee that the criticism of the emissions scenarios “only validates the methodology that the IPCC used earlier” and “does not invalidate it”. A press statement published on the IPCC website which is devoted specifically and exclusively to brushing aside the Castles and Henderson critique says that the IPCC “mobilises the best experts from all over the world”, and describes us as “so called “two independent commentators'”. The IPCC has selected Professor Nakicenovic and Brian Fisher, Director of the Australian Bureau of Agricultural and Resource Economics (ABARE), as the two Coordinating Lead Authors of the chapter in the Panel’s next assessment report (AR4) that is to assess criticism of the IPCC Special Report on Emissions Scenarios (SRES). In their first response to the Castles and Henderson critique, Professor Nakicenovic and 14 other lead authors of the SRES said that “Mr Castles and Mr Henderson have focused (at tedious length) on constructing a “problem’ that does not exist”, and in their “final” response Nakicenovic and 17 other lead authors persisted in affirming the “methodological soundness of the use of MER for developing long term emissions scenarios”. Brian Fisher, the other CLA of the chapter that is to assess the IPCC scenarios, is the co-author of an article published by ABARE (of which he is Director) which states that “The use of [market exchange rates] in the SRES remains valid and the critique by Castles and Henderson cannot be sustained.”
Australia’s leading scientific research organisation, the CSIRO, appended an opinion piece by atmospheric scientist Kevin Hennessy to its submission to an Australian Senate Committee Inquiry into the Kyoto Protocol Ratification Bill 2003. According to Mr Hennessy, Castles and Henderson have claimed that the IPCC warming projections are based on greenhouse emissions that are too high because market exchange rates (MER) were used rather than purchasing power parity (PPP) in calculating future economic growth. The claims have been reviewed and refuted by international experts (Nakicenovic and others). The list of references to the opinion piece did not include any paper by “Nakicenovic and others”. Mr Hennessy subsequently declined an invitation to produce a paper on the CSIRO’s emissions scenarios for Energy & Environment (the journal in which Nakicenovic et al appeared), on the grounds that the CSIRO prefers to publish in peer-reviewed journals listed by the Institute for Scintific Information (ISI). Mr Hennessy has been selected as a Coordinating Lead Author of the “Australia and New Zealand” chapter of the next IPCC Report.
At the IPCC Expert Meetings on Emissions Scenarios last January, Professor John Weyant of Stanford University, Director of the Energy Modeling Forum, defended the use of exchange rate converters by the IPCC on the ground that “best practice can differ between making historical welfare comparisons and model projections of GDP, energy and carbon emissions.” According to the Report of the meeting “Weyant recommended using MERs or PPPs consistently.” It is of course a contradiction in terms to urge the use of MERs “consistently”. In a letter to Dr Pachauri three years ago I pointed out that an expert committee appointed by the UN Statistical Commission had found that there were “material errors” (that is, errors which left the reader with “a fundamentally distorted view of the phenomena being described” in the UNDP’s Human Development Report 1999. I noted that the same statements had been repeated uncritically in IPCC reports. Two of these were in a chapter of the last assessment report of which Professor Weyant was Coordinating Lead Author. The IPCC has not acknowledged that any mistakes were made in the last assessment report and has selected Weyant as Review Editor of the Chapter in the next assessment report which is to review criticisms of the IPCC emissions scenarios.
Another Lead Author of the next IPCC Assessment Report whose country of residence appears on the IPCC lists as “Australia” is Bill Hare, who was one of the invited experts to the recent IPCC Workshop on Emissions Scenarios (as a representative of “Greenpeace, Environmental NGO”). Mr Hare argued for a strong role for the IPCC in the development of scenarios in the future, and asserted that the SRES had been a “big success”.
In my first letter to the Chairman of the IPCC three years ago, I said that it would “be desirable to seek the involvement of national statistical offices and of the International Statistical Institute (ISI) in the new emissions projections that I understand are to be prepared for the IPCC’s Fourth Assessment Report.” The IPCC subsequently decided that there would be no emissions projections. It has not invited any representatives of national statistical offices or of the ISI to any of its expert meetings, nor have any national accounts experts been included in the writing teams for the next assessment report.
The IPCC can ignore the world’s leading economists and statisticians with impunity, because it has the support of “the worldwide scientific community”. In its submission to the House of Lords Committee, the Royal Society (UK) explained that:
“The work of the IPCC is backed by the worldwide scientific community. A joint statement of support was issued in May 2001 by the science academies of Australia, Belgium, Brazil, Canada, the Caribbean, China, France, Germany, India, Indonesia, Ireland, Italy, Malaysia, New Zealand, Sweden and the UK. It stated: “We recognise the IPCC as the world’s most reliable source of information on climate change and its causes, and we endorse its methods of achieving consensus.”
The joint statement of support appeared in “Science”, the journal of the American Association for the Advancement of Science. In a news item published in the same issue of “Science”, the President of the Royal Society, Lord May, explained that the Royal Society had organised the petition because of resistance to the terms of the Kyoto Protocol by countries such as the US and Australia.