25 thoughts on “Australian clean energy future costs & benefits”

1. Warwick,
   just fresh from forum.onlineopinion.com.au where Peter Lang has a thread going on the costs to industry of compliance.

   Without reading Garnaut, I am sure that neither he nor the Public Service has ever considered the cost to industry. Their attitude (to reuse a comment) is that of a feudal Baron addressing peasants. They assume that everybody will drop everything and deliver the information, backing up their demands with threats of fines and imprisonment. That it might be impossible to do so isn’t acceptable, but as they have no idea and no way of checking the accuracy, the forms will get filled out but the figures might not be accurate as they believe.

2. Warwick,

   Thank you for putting up a post on this issue. I beleive this is where the rubber hits the road. What is the cost (in $) of the proposed mitigations sttrategies, what is the probability they will change the climate in the way we would like and what is the benefit (in $) if the do?

   Graeme, thank you for pointing people to the On Line Opinion articels and comments. There are 50 comments and som excellent discussion. The comments by Graeme are very revealing in many ways (eg how the bureaucrats acted in instructing and threatening people in industry to provide information no matter how the engineers, like Graeme, pointed out it wass impossible and if they did the numbers would be meaningless. The way the Graeme’s usccessor handled the matter is priceless. www.onlineopinion.com.au/view.asp?article=13578

3. “Economic models of climate change often take the problem seriously, but paradoxically conclude that the optimal policy is to do almost nothing about it. We explore this paradox as seen in DICE.”

   The economics of inaction on climate change: a sensitivity analysis
   www.ingentaconnect.com/content/earthscan/cpol/2006/00000006/00000005/art00002

   “Economists have often projected very small damages, or even net benefits, from the early stages of warming.”

   A comment on “Economy-wide estimates of the implications of climate change: Human health”
   dx.doi.org/10.1016/j.ecolecon.2007.10.006

   “This paper presents a first estimate of the exposure of the world’s large port cities (population exceeding one million inhabitants in 2005) to coastal flooding due to sea-level rise and storm surge now and in the 2070s, taking into account scenarios of socio-economic and climate changes.”

   A global ranking of port cities with high exposure to climate extremes
   dx.doi.org/10.1007/s10584-010-9977-4

   Figure 3 shows that for Australasia the assets exposed to a 0.5 m sea level rise are negligible. Given that the projected sea level rise would occur over a 100 year period, even if it happens in steps, and given we are always replacing infrastructure in the normal course of events, it strains credulity to believe that sea level rise would be catastrophic. It is a cost but it seems it would be much cheaper to adapt if and when it happens.

4. Economic Policy in the Face of Severe Tail Events,
   WILLIAM D. NORDHAUS, 27 MAR 2012
   onlinelibrary.wiley.com/doi/10.1111/j.1467-9779.2011.01544.x/abstract

   Abstract:

   From time to time, something occurs which is outside the range of normal expectations. We will call these “tail events” in the sense that they are way out of the tail of a probability distribution. I consider the question of the implications of tail events for economic policy and climate-change economics. This issue has been analyzed by Martin Weitzman who proposed a Dismal Theorem. The general idea is that, under limited conditions concerning the structure of uncertainty and risk aversion, society has an indefinitely large expected loss from high-consequence, low-probability events. Under such conditions, standard economic tools such as cost-benefit analysis cannot be applied. The present study is intended to put the Dismal Theorem in context and examine the range of its relevance, with an application to catastrophic climate change. I conclude that tail events are sometimes of extreme importance, and we must be extremely careful to include them in situations of deep uncertainty. However, we conclude that no loaded gun of strong tail dominance has been uncovered to date.

   (my highlight)

5. In the Climate Casino: An ExchangeRoger W. Cohen, William Happer, and Richard Lindzen, reply by William D. Nordhaus
   April 26, 2012

   www.nybooks.com/articles/archives/2012/apr/26/climate-casino-exchange/

   I received this pertinant commment regarding this exchange by email:

   Behind all the sniping, this debate seems to hinge on how to handle uncertainty. The alarmists believe things might be much worse than the “best estimate” projections therefore the sky is falling; in contrast the sceptics feel that things won’t be as bad at the “best estimate” therefore no worries. It occurs to me that both are missing the point.

   Uncertainty about the problem is a given; uncertainty about the chosen solution is inexcusable. Which is to say, that we should be confident that solutions we implement are going to be effective, and the more expensive the solution the more confident we should be.

   To illustrate what I mean, suppose we detect a large asteroid whose orbit will intersect earth’s, and on best estimates there is a 1% probability it will hit earth. Clearly, we wouldn’t let uncertainty prevent us from reacting to the threat. One response might be to spend trillions of dollars to build a fleet of nuclear-tipped missiles to destroy or deflect the asteroid. Is this a good idea? Well, it depends on how certain we are that missiles will work. If there is only, say, a 5% chance, or worse we don’t know the odds, then it is time to go back to the drawing board.

   In short, big responses require high levels of confidence that they will work. I am not sure our C tax meets this test.

6. Benefit to cost ratio of the Australian CO2 pricing scheme to 2050

   In an interesting exchange between Roger W. Cohen, William Happer, and Richard Lindzen, reply by William D. Nordhaus on “The New York Review of Books” www.nybooks.com/articles/archives/2012/apr/26/climate-casino-exchange/ William Nordhause (hereafter WN) said:

   The final part of the response of CHL comes back to the economics of climate change and public policy. They make two major points: that the difference between acting now and doing nothing for fifty years is “insignificant economically or climatologically,” and that the policy questions are dominated by major uncertainties.

   Is the difference between acting now and waiting fifty years indeed “insignificant economically”? Given the importance attached to this question, I recalculated this figure using the latest published model. When put in 2012 prices, the loss is calculated as $3.5 trillion, and the spreadsheet is available on the Web for those who would like to check the calculations themselves. If, indeed, the climate skeptics think this is an insignificant number, they should not object to spending much smaller sums for slowing climate change starting now.

   I am surprised that WN says the $3.5 trillion is a significant number, given that it is cumulative to 2050 for the whole world. I am also surprised that WN says skeptics “should not object to spending much smaller sums for slowing climate change starting now.” I calculate the costs to achieve the predicted $3.5 trillion reduction in climate damages would be around nine times greater than the estimated $3.5 trillion saving. Here is how I did my calculations.

   I converted the estimated $3.5 trillion world damages avoided to the Australian proportion on the basis of Australia’s share of world GDP, i.e. 1.17%. So Australia’s share of damages avoided is 1.17% x $3.5 trillion = $41 billion. That is the cumulative damages avoided by Australia to 2050. It assumes an optimum CO2 price and assumes the whole world implements the CO2 price in unison.

   The Australian Treasury estimated the loss of GDP that our legislated CO2 tax and ETS will cause. [However, it seems they may have underestimated because they, apparently, have not estimated the compliance cost, www.onlineopinion.com.au/view.asp?article=13578. The cumulative loss of GDP to 2050 is $1,345 billion (undiscounted), or $390 billion discounted at 4.34%, which I believe is the discount rate that is the default in RICE 2012 and gives the value of $3.5 trillion quoted by WN.

   If my calculations are correct, the benefit, to Australia, of the optimum CO2 tax rate (if the world implements it in unison) would be $41 billion and the cost in reduced GDP would be $390 billion. Therefore, the benefit to cost ratio is 0.11. [benefit/cost should be greater than 1 for the policy to be justified] .

   Therefore, I do not understand WN’s statement that “[skeptics] should not object to spending much smaller sums for slowing climate change starting now.” My calculations suggest we would spend nine times greater sums, not smaller sums, to achieve the benefits estimated by WN.

   I expect WN would say most of the damages occur beyond 2050 and I have not included these. However, the damage estimates seem to be exaggerated, and may not make proper allowance for adaption. Projecting damages out to 2590, as WN does, and based on a small number of studies that are likely to over estimate the damages, is not a sound basis for policies that will seriously damage our economy now and forever.

   References:

   [1] Treasury (2011):
   archive.treasury.gov.au/carbonpricemodelling/content/chart_table_data/chapter5.asp (Chart 5:13)

   [2] Nordhaus Yale-RICE Model (2010):
   nordhaus.econ.yale.edu/

7. There’s something in all this huge new Tax on CO2 emissions that I’m still unsure about, and there being 18/19 separate pieces of Legislation, it’s difficult to search for, if it’s even in there at all.

   I hope you’ll bear with, because it’s not all that easy to explain, and because of that, probably difficult to understand, so I’ll use Macquarie Generation as an example, and use their data from the NGER. They have Scope 1 plus Scope 2 emissions of 20524177 tonnes of CO2, hence their total payout is around $472 Million +.

   In this first year the Government is not charging them the full cost. They will however be issuing the full credit total, that 20 million + number. However, what they are doing is giving the emitting entity a certain percentage of credits, and only charging them for the remaining number to make up the full credit total number. Again, those numbers are not to be found, well, by me anyway.

   So, add up all the emissions, multiply by 23, and there’s the Government take for each emitting entity.

   However, as they are giving away X credits to each entity, then their take is considerably less. Each year, those giveaways diminish, until when the ETS comes in, the entities will be paying the full cost for all their credits.

   Now comes the part I can’t work out.

   Will that entity (in this case MacGen) be passing on (a) the full cost for their total credits to the electricity consumers, and pocketing what they do not have to pass back to the Government, or will they only be passing on (b) the amount for the credits they actually have to pay for.

   If it is (b), then can you see how ‘tricky’ the Government is being here. The electricity provider will only be passing on a fraction of what the total cost will really be, rising each year. So now, when electricity costs increase only marginally, the Government can indeed point to that small cost and say that the sky really hasn’t fallen in, a very clever way of making it ‘seem’ that this tax is really not that much at all, and that slow yearly rise ‘may’ be considered as just ‘normal’ price rises.

   See the point here?

   Also, if it’s (a) it could even be used as ammunition by green supporters as in some way subsidising coal fired power.

   Either way, the only one who looks like the ‘bad boy’ in all of this is not the Government, but the so called ‘polluting’ entity.

   That ‘tactic’ of giving away those credits in this first year, diminishing in later years is actually part of that Legislation, artfully titled as ‘Energy Security’, in other words making sure that the Tax does not send the emitting entity to the wall, as it surely would if it was introduced at the full credit rate in year one.

   It also works another way in favour of the Government. The compensation, (or bribes if you will) in Year one, when they are not taking in the full amount, ‘seems’ to be greater than what they are taking in, and that total take grows each year while the compensation stays the same, gradually being eaten away by outside things anyway. What you also need to realise in this is that electricity is consumed in three sectors, Residential (38%) Commerce (37%) and Industrial (24%) and the compensation package is only going to (part of) that residential sector, so while your personal electricity bill rises, probably by not very much in the overall scheme of things, think of the other two sectors who have to bear the full cost of electricity price increases, and as an example, think just of Coles and Woolies in that Commerce sector. They don’t just have the one fridge as we do in our homes (14% of your electricity bill right there) but they have banks and banks of cold storage and freezers in the rows you walk down, let alone out the back for other cold storage. All of those costs, and in their cases that will be huge, will have to be passed on, as they will have to in every place you shop. The Government has already started their ‘money grubbing capitalist’ ad campaign saying they better not be taking advantage of this huge rise in their electricity costs, painting THEM as the bad boys in this for passing on their increased costs.

   I understand it’s not an easy concept to understand, but it seems that everything about this huge new tax is indeed ‘mean and tricky’.

   This all adds up to only one thing. When the Government gives away those free credits at the start, then they know that something like this could drive some of those emitting entities to the wall, and if you look at it from the other side’s point of view, isn’t that in fact the desired result, because if they are driven out of business, then they stop emitting, hence actually lowering those emissions. Giving away credits like this only means one thing. The Government is not doing this to lower emissions. They are doing it to ensure there will be a steady stream of income. It really is only about the money.

   Again, sorry to take so much space here

   Tony.

8. TonyfromOz

   Why I agree that the Government is devious, I think you underestimate them.

   The “free” credits in the first few years do result in a slower increase in the price of electricity. The other benefit is that the generators don’t shut down and cut off the electricity (and upset the voters).

   The trick is in the timing; the “compensation” payments go out and the voters compare the sums with the slower rise in electricity and other prices, and conclude that they are better off. At that point the election is called.
   In the second (and third) year there is no lift in payments, but electricity and other prices will be climbing rapidly, but the election is over.
   I have always felt that Julia intended an election in July or August this year, hence the necessity for a budget surplus and more cash handouts. How she must curse Thompson and Slipper (and Rudd). She cannot win an early election, but to delay until the end of next year would be worse, as by then the voters will realise the cost of the carbon tax.

9. Tony and Graeme,

   I agree. The consumers, taxpayers and electors are being sucked in with a ‘honeymoon rate”. The costs for the se groups will increase over time as:

   1. The bribes paid out at the beginning run out and are not continued

   2. compliance costs for CO2 pricing ramps up over time (ref: www.onlineopinion.com.au/view.asp?article=13578

   3. more and more industries are included in the scheme

   4. future governments need more revenue to pay for their profligate spending

   5. UN gets its hands into the racket somewhere along the line

   6. The scheme increases in size, more and more developed countries what to buy permits from underdeveloped countries, more and more fraudulent schemes are started, more and more compliance is required and more and more money is lost on fraudulent schemes (inside and outside Australia)

10. I reckon WSH has asked the key question that voters will want to know before voting at the next election – what are the costs and benefits of Australia’s clean energy future legislation.

    I expect there is more uncertainty in the estimates of the benefits than the costs. While I expect the costs are underestimated – e.g. they appear to have not estimated the compliance cost of CO2 pricing and probably underestimated many other costs – the estimates of the benefits seems to be much more uncertain.

    Therefore, I suspect the greatest return for research effort would be to look into the basis of the estimates of the benefits.

    Consider AGW induced rise in sea level for example. WSH quoted one of the Government’s references as saying: “sea level rise affecting property worth $226Bn over the next century”.

    But what does this mean? We don’t need to know how much property can see the sea. What we need to know is how much damage would CO2 pricing avoid.

    Given that the projected sea level rise would occur over a 100 year period, even if it happens in steps, and given we are always replacing infrastructure in the normal course of events anyway, it strains credulity to believe that sea level rise would be catastrophic. It is a cost but it seems it would be much cheaper to adapt to it as and when it happens.

    Figure 3 in this paper dx.doi.org/10.1007/s10584-010-9977-4 )
    seems to say that the costs to Australia of a 0.5 m rise in sea level over 100 years would be negligible.

    And that is from an alarmists’ paper. But even the most optimistic claims by CO2 pricing proponents, admit that CO2 pricing would avoid only a small proportion of damages. Therefore, the benefit of CO2 pricing in terms sea level rise avoided, is even less.

    It seems the economic justification for CO2 pricing is weak.

    It would be great to find a good, detailed explanation of how the damages expected to be cause be a rise in sea level have been estimated.

11. Should we mitigate or adapt?

    A C-tax or an ETS seems to be the favoured mitigation method. But this is bound to be a low-confidence response. Such schemes are wide open to rorting and rent-seeking, they have high compliance costs, the chances of the world acting together are very low, and the technology is not yet sufficiently advanced to make large reductions at reasonable cost. Nor is there a shred of evidence that C taxes or ETS’s actually work. Even if they did work, it would only be partial mitigation.

    In contrast, adaption is a high-confidence response. If we feel it is necessary to build dykes along Bangladesh coastline, we can be very confident that it can be done and what it will cost. As climate changes advances, our responses can be tailored accordingly. It may (or may not) be very expensive, but we can be reasonably certain that the money spent will meet the objective.

12. Note that the Australian Bureau of Statistics has a number of guidelines for measuring climate change that are being updated. From my initial reading the guidelines are as specific as the rest of the material you have seen to date.Having managed social impact assessments in a number of industries I can tell already that there will be statistical bias. Here is a link

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14. √

15. Gotta love this methodology in the paper cited by Peter Lang on the impacts of sea level rise:

    “the present analysis assumes a homogenous global rise of 0.5 m above current levels by 2070. This is in the upper range of IPCC projections (IPCC 2007) and well within the ranges of other projections (e.g. Rahmstorf 2007). The storm enhancement factor (reflecting the potential increase in extreme water levels due to more intense storms) was developed as part of this study; for tropical storms a 10% increase in extreme water levels was assumed, with no expansion in affected area; while for extratropical storms, a 10% increase in extreme water levels was assumed between 45and 70 degrees latitude. …a uniform 0.5 m decline in land levels was assumed from 2005 to the 2070s in those cities which are historically susceptible, commonly port cities located in deltas. Together, this approach gives a variable change in extreme water level from roughly 0.5 m in cities only affected by global sea-level rise, to as much as 1.5 m for those cities affected by global sea-level rise, increased storminess and human-induced subsidence.”

    Note that not a single actual datum on observed change in relative sea level is used for any of the ports in the study.

    Now, actual observed changes in relative sea level around the world averages around 3 mm a year – i.e., 20 cm per 65 years. No acceleration is evident in recent decades. Yet the paper assumes rises of 50-150 cm in the next 65 years.

    These grossly exaggerated figures start with a little fib about a “homogenous” rise of 50 cm being “in the upper range of IPCC projections”. The actual 2007 IPCC forecast sea level rise was 18 to 59 cm from c.1990 to c. 2095. For 2005 to 2070, that’s only c.10 to c.35 cm. How is 50 cm within this range?

    Then they bung on, without evidence, 10% for worse storms.

    Finally they top it off by adding (again without reference to data) another 50 cm for subsidence in subsiding areas, without making any allowance for the land level rising in other places.

    And since when did subsidence, in those areas which are “historically susceptible” to it, become “human-induced”?

    Altogether, a very amateurish effort, the results of which could hardly be taken seriously. You don’t need much to get an alarmist paper into a climate journal these days.

16. Reviewing his own work three years on, Garnaut starts with:

    The 2008 Garnaut Climate Change Review argued that it is neither rational nor helpful for someone to reject a policy recommendation because they do not like it.

    • For discussion of policy to be productive, it is necessary for debate to focus on the validity of the premises, logic and information that led to a recommendation.

    What an arrogant, self-absorbed pill Garnaut must be to lecture the reader in such a tone.

    Garnaut also makes a highly questionable logical assumption one paragraph later when he says that:

    the presence of uncertainty in the range of possible climate outcomes strengthens the case for climate change action;

    This logic would soon have us spending billions on chimerical threats. The more far-fetched a threat is, the greater the uncertainties are around it. Contrary to his view, it would be much more logical to spend the money we have now on the problems we have now. In the case of climate change, where possible outcomes vary from net benefits to catastrophe, and the time horizon is decades in the future, the case for “action” is weak until we know a lot more about likely costs and benefits.

17. Also gotta love the methodology in the paper on sea level rise Peter Lang links to above:

    the present analysis assumes a homogenous global rise of 0.5 m above current levels by 2070. This is in the upper range of IPCC projections (IPCC 2007) and well within the ranges of other projections (e.g. Rahmstorf 2007). The storm enhancement factor (reflecting the potential increase in extreme water levels due to more intense storms) was developed as part of this study; for tropical storms a 10% increase in extreme water levels was assumed, with no expansion in affected area; while for extratropical storms, a 10% increase in extreme water levels was assumed between 45 and 70 latitude…a uniform 0.5 m decline in land levels was assumed from 2005 to the 2070s in those cities which are historically susceptible, commonly port cities located in deltas. Together, this approach gives a variable change in extreme water level from roughly 0.5 m in cities only affected by global sea-level rise, to as much as 1.5 m for those cities affected by global sea-level rise, increased storminess and human-induced subsidence.

    A few of the more obvious flaws in this:

    Current rate of sea-level rise, including the average of subsiding and rising land levels: 3 mm/year. For 65 years, that’s 20 cm. There is no evidence of significant acceleration in recent decades. So assuming 50 cm global rise in the next 65 years is already far too high.

    2007 IPCC projection for sea level rise: 18 to 59 cm from 1980-99 to 2090-99, i.e. 105 years. Taking only 2005 to 2070: roughly 10 to 35 cm. Contrary to the paper, 50 cm is NOT in this range.

    The 10% rise in extreme water levels from worse storms is a sheer invention, no evidence offered.

    The allowance for subsidence of 50 cm in 65 years is one heck of a rate of sinking, and how could it be “human-induced” if it only applies to areas that are “historically susceptible” anyway? Also, why no allowance the other way for parts of the world in which the land is rising?

    Any figures coming out of such a badly flawed methodology would have to be just about worthless.

    Why couldn’t they have even bothered to look at the tide gauge records for the major cities they were talking about before making projections based on what those gauges would show in future?

    You sure don’t need much to get an alarmist paper into a climate journal these days.

18. David Brewer, I agree and add:

    Professor Ross Garnaut was a political appointment by a Labor Government. He had previously been the senior economics adviser in the office of the Labor Prime Minister, Bob Hawke. He is clearly politically partisan.

    The comments by Professor William Nordhaus about Sir Nicholas Stern, a political appointment of the UK Labour Government, are possibly applicable to Ross Garnaut’s works for the Australian Labor Party.

    Professor William Nordhaus, arguably the world’s most highly regarded authority on CO2 pricing, conducted “A review of the Stern Review on the Economics of Climate Change” piketty.pse.ens.fr/fichiers/Nordhaus2007b.pdf .

    The abstract says:

    How much and how fast should we react to the threat of global warming? The Stern Review argues that the damages from climate change are large, and that nations should undertake sharp and immediate reductions in greenhouse gas emissions. An examination of the Review’s radical revision of the economics of climate change finds, however, that it depends decisively on the assumption of a near-zero time discount rate combined with a specific utility function. The Review’s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today’s marketplace real interest rates and savings rates.

    Section 2 makes this statement:

    First, the Review should be read primarily as a document that is political in nature and has advocacy as its purpose.

    and then elaborates in the following paragraphs. This section in particular is worth reading.

19. David Brewer, as you point out, this is an example of how extremists make up information to support their beliefs. Then Garnaut, Treasury, Climate Institute, Government, Multi-Party Climate Change Committee and finally Parliament take this figure and use it as the basis for modelling to justify a CO2 tax.

    Can anyone please provide links to the most authoritative estimates of the damage costs due to an assumed sea level rise, of say 0.5 m in 100 years.

    I want to try to drill down into the basis of the damage cost estimate to understand how it has been done.

    I’d really like to see an estimate of the damage cost estimate for a Australia or a city e.g. Sydney. Where can I get such an estimate (other than by clearly alarmist groups such as Greenpeace and Ross Garnaut)?

20. See Section 3 here: www.canadafreepress.com/index.php/article/46648

    As Tol’s diagram quite clearly indicates, the consensus of economic studies finds that global warming would be on net beneficial to human welfare, at least through 2C degrees of warming (and this is relative to the current baseline, not to preindustrial times).

    And

    using Nordhaus’ own preferred studies, in conjunction with the standard IPCC simulations, the best estimates currently predict that unregulated greenhouse gas emissions will provide net benefits to human welfare for the next sixty years.

    And

    When Nordhaus claims in his New York Review of Books article that his work shows the benefits of a carbon tax, the reader must realize that he means an optimally calibrated tax that is simultaneously implemented by all governments around the world, and is maintained at the (time-varying) optimal level through the year 2100. Nordhaus is saying that the best science tells us that that outcome would be better than governments doing nothing to restrict the market’s emissions of greenhouse gases.

    Obviously, this standard of a textbook-optimal, decades-long, world-comprehensive carbon tax is quite an unrealistic benchmark to contrast with the real-world market outcome. Using Nordhaus’ own model, we can test the robustness of his result by looking at what happens when (say) only half the world participates in a carbon-limitation program, or when (say) governments penalize carbon emissions at more than the economically efficient rate. These tweaks can significantly reduce the “net benefits” flowing from a carbon tax.

    And

    Conclusion

    The actual situation is that the physical climate models have indeed predicted more warming than has actually occurred, while the economics literature casts serious doubts on the case for immediate government mitigation efforts.

21. I’ve done plenty of cost benefit analyses and with the right discount rate and a couple of dodgy assumptions you can make any action have a cost benefit at some point in the future.

    And to recycle an old joke.

    “How can you tell a climate scientist is lying?”

    “They have issued a press release.”

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23. Robert Mendelsohn (2009), Climate Change and Economic Growth, World Bank

    AbstractGrim descriptions of the long‐term consequences of climate change have given the impression that the climate impacts from greenhouse gases threaten long-term economic growth. However, the impact of climate change on the global economy is likely to be quite small over the next 50 years. Severe impacts even by the end of the century are unlikely. The greatest threat that climate change poses to long‐term economic growth is from potentially excessive near‐term mitigation efforts.

    www.growthcommission.org/storage/cgdev/documents/gcwp060web.pdf

24. “Global Risks 2012” shows that AGW is not amongst the highest threats to human welfare.
    www.weforum.org/reports/global-risks-2012-seventh-edition

    Methodology, P21, says:

    “These four Critical Connectors, which link the main clusters of the system, are highlighted as black dots in the diagram. They are:

    – Severe income disparity (economic)
    – Major systemic financial failure (economic)
    – Unforeseen negative consequences of regulation (economic) [bold added]
    – Extreme volatility in energy and agriculture prices (economic)”

    The greatest threats are all economic. And notice the third dot point!

    This is an impact v likelihood plot from the “expert opinion” of the 460 economists who contributed:
    reports.weforum.org/global-risks-2012/#/ol=data-explorer&of=landscape.html&=

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