Breaking down evidence of global warming
Senior Quantitative Analyst, Saxo Bank
Summary: Human-generated emissions over the past 150 years most likely will persist for centuries and result in long-term changes in the climate system
The United Nation’s body for assessing science related to climate change – the Intergovernmental Panel on Climate Change (IPCC) – estimated in 2018 that human activities have caused a global temperature rise of around 1.0°C above pre-industrial levels [IPCC].
Plenty of other research groups are seeking to understand the drivers of global temperature rises by applying various climate models and simulations. The estimates of anthropogenic climate change rely on a comparison with an artificially generated model assuming the conditions of the earth without human activity. As this parallel scenario will never be realised, these climate models seek to find the best qualified guess for the parallel scenario by looking at the fundamental drivers of climate change in the past prior to human existence. As this is a difficult task, a broad variety of climate models with associated uncertainties are presented every year, all contributing to the broader climate discussion.
We do not seek to take any stance in the climate debate, but an understanding of temperature drivers is a solid basis for having a qualified view. This is also from an economic point of view, as climate change can have major geographical impacts that require a shift in agricultural production, demographical reallocations etc.
Figure 1 – Temperature trends for the past 65 million years:
The temperature of the Earth fluctuates a great deal and on a number of timescales (see Figure 1). The larger trends have been a long-term cooling from tens of millions of years before the present era in which the CO2 concentration in the atmosphere declined, and a more recent period of heating since the last Ice Age. Periodic variations in the temperature occur in cycles of 10k-100k years, driven by changes in the orbit of the Earth. These timescales are much longer compared to the changes during the past 150 years, when the global temperature has been in a rising trend. This is shown in the Berkeley Earth surface temperature project in Figures 2.
A simple climate model presented by Carbon Brief breaks down global warming since the industrial revolution into contributions from different factors as indicated in Figure 2. In a simplified overview, the major factors that will affect the Earth’s climate are:
- Greenhouse gasses, such as carbon dioxide and methane. These absorb infrared radiation emitted from Earth’s surface and re-radiate it back to Earth’s surface, driving a net rise in warming.
- Ozone, which is a short-lived greenhouse gas that also traps outgoing heat — although ozone reactions in the upper atmosphere result in a net cooling.
- Aerosols, which are tiny particles such as dust or even pollutants from human activity that float in the atmosphere. They drive a net cooling effect by forming clouds that reflect sunlight.
- The type of vegetation on land. This affects the absorption of sunlight, as dense forests absorb more sunlight than fields with a more reflective surface.
- Sunspots. These are storms on the surface on the Sun with huge magnetic activity, and they may affect the climate of the Earth. However, no upward trends in these activities has been measured since 1978.
- Volcanoes, which erupt particles (effectively aerosols as above) into the atmosphere that block sunlight and thus in general have a net short-term cooling effect.
According to Carbon Brief, the human-generated impacts such as the increased greenhouse effect from CO2 and other emissions have had a major influence on rising global temperatures relative to any natural effects. This agrees with the research by IPCC, stating that human-generated emissions over the past 150 years most likely will persist for centuries and result in long-term changes in the climate system. If the present trend persists, IPCC estimates that the global temperature will rise another 0.5°C within the next 10-30 years, and the risk of a climate-related damage for natural and human systems is likely to be higher at this point than at present levels. [IPCC]
The broad variety of climate models propose many different future scenarios. Some of them contain extreme tail-risk scenarios with a very low probability of realisation. But if they are realised, they can have major social and economic impacts: causing major flooding, scarcity of food supply etc. In the end, none of these models may contain the actual scenario which is going to be realised, but it is worth keeping up to date with the newest research – even the low-probability scenarios – as risks gather that climate change makes a larger and accelerating impact on our future.
[IPCC: IPCC, 2018: Summary for Policymakers, Global Warming of 1.5°C]
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on EquitiesThe Nasdaq bubble pattern, USDJPY resistance, crude oil uptrend losing steam and the technical outlook for USD.
China: the train of new development paradigm left the station two years agoChina is transiting to a new development paradigm, as they are hit by deteriorating terms of trade, a slower global economy and an uncertain future while continuing attempts to contain the pandemic.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)