Thinking in boxes, Australian Government's Intergenerational Report misleads and fails to connect the climate dots

The Australian Government’s public analysis of climate risk, our greatest threat, is dangerously misleading. The Intergenerational Report 2023 (IGR) is a prime example. By dumbing down the implications of climate change with simplified economic models, the IGR and similar reports are institutionalising the global failure to face climate reality.

The US inquiry into the 9/11 World Trade Centre attack in New York concluded that the greatest government shortcoming was the intelligence agencies’ failure to “connect the dots”. The Brookings Institute explains that “thinking in silos” meant that “pieces of the puzzle were to be found in many corners of the US government but no one connected the dots well enough or in a timely enough manner to predict with sufficient accuracy the attack that came”.

The IGR claims to canvass the big impacts on the Australian economy and budget over the next 40 years, but in focusing on economic detail it misses the systemic global climate risks that will upend the Australian economy and fails to connect the most critical climate dots.

It is a classic example of “thinking in silos” identified in the 2016 UK report Thinking the unthinkable as one factor that led to “a new fragility at the highest levels of corporate and public service leaderships”, in that their ability to spot, identify and handle unexpected, non-normative events has become “perilously inadequate at critical moments”.

The IGR says climate warming will have “profound impacts” with “some costs… unavoidable”, but also presents “new opportunities and economic challenges” with Australia “well positioned with renewable energy potential and abundant natural resources” to “take advantage of the opportunities emerging from the global net zero transformation”.

The media coverage of the IGR had one big number, typically headlined as “Global warming to cost Australia up to $423 billion over 40 years”. Sounds impressive, but over 40 years that is only 0.5% of current GDP each year on average, and that figure was just a rough estimate of the impact of decreases in labour productivity levels caused by climate disruption. In the absence of other big numbers, and an inquisitive media, it was easy for readers to mistake it for the whole story, whereas it is a relatively minor component.

Other key impacts identified were a one-to-three percent decline in crop yields, a 6–25 percent drop in tourist arrivals, and the increasing cost of more extreme climate impacts, including a cumulative $130 billion of Government spending on Disaster Recovery Funding Arrangements. And that was about it.

A footnote acknowledged that only “selected impacts” had been examined in ”a partial assessment of the physical impact”, excluding “health impacts, biodiversity loss, storm surge and sea level rise, amongst many others”. Another silo.

The report suggests, rather disingenuously, that Australia is on board with global actions to hold warming to well below 2°C, which current policy patently demonstrates is not so. Government enthusiasm for domestic and export fossil fuel expansion hardly meets the need for “deep, rapid and immediate greenhouse gas reductions”.

The IGR reasserts the need to achieve the 1.5–2°C goal but seems unaware that this horse has already bolted. The world has just recorded its first 1.5°C month (July), may get close to an annual average 1.5°C in 2023-24, with the longer term warming trend reaching 1.5°C by the end of this decade.

Emissions reductions alone will not stop Earth charging past 2°C; that task would have required a halving of emissions between 2020 and 2030, but the latest projections suggest that emissions may simply plateau this decade. If the rate of warming accelerates, as seems likely, the trend will pass 2°C well before 2050, and by 2063 — the end point of the IGR’s 40-year time frame — it may be heading towards 3°C.

A prudent, precautionary, approach to climate risk management would focus on this scenario, because it is now the most likely, and the most damaging. The IGR does acknowledge that “as temperature increases approach 2°C, the risk of crossing thresholds which cause nonlinear tipping points in the Earth system, with potentially abrupt and not yet well understood impacts, also increases”, but that insight is left dangling. What would this mean for the economy? Not a word. Another silo.

So what will Australia likely face by 2063? It will include heat extremes in the northern quarter of Australia beyond the niche of historically experienced temperatures, fatal for people and agricultural stock without mechanical cooling. A 2021 UK risk assessment concluded that by mid-century global food demand would be up 50 percent, but crop yields down 20 to 30 percent, an equation that would result in global famine and a food cost-of-living crisis making our current problems look like a picnic.

That same report found that by 2050 climate disruption would drive political instability and greater national insecurity, and fuel regional and international conflict. Supply lines? Lost markets? Global financial crisis? The mass forced displacement of people? We don’t have to put a dollar figure on that to understand the consequences.

The IGR, by dumbing down the implications of climate change with simplified economic models, repeats the same mistakes made by the Task Force on Climate-Related Financial Disclosures, and the Central Banks’ Network for Greening the Financial System, which are institutionalising the global failure to face climate reality.

The report gives the impression that 2, 3 or even 4°C temperature increases would be relatively benign, readily adapted to with some free-market policy juggling. The reality is that 3°C would be catastrophic and 4°C beyond the limits of human survivability in many parts of the world, Australia included. American security analysts have concluded [csis.org/analysis/age-consequences] that 3°C would likely lead to “outright chaos” and “nuclear war is possible”. What of the economy then?

It is likely that the climate-security assessment carried out by the Office of National Intelligence (ONI) in 2022, which focussed on regional risks, would have come to similar conclusions. But the ONI report lies locked away on national security grounds, in its own silo, never to see the light of day even in a redacted form according to the Prime Minister. It is obvious that the intergenerational report was not informed by the ONI assessment, which it should have been.

There is nothing that the Australian Government has put into the public arena that frankly sets out the climate threat. Contrary to the political transparency and honesty we were promised, the Australian community is being deliberately kept in the dark about this greatest challenge.

The climate threats to the Australian economy are systemic, networked into the global climate and human systems as a whole, rather than to individual components. Physical climate system impacts are compounding and creating second-order cascading effects at the economic, social and political levels.

Lacking a big picture understanding of these systematic risks as a framework within which to assess economic impacts, the IGR flounders. A similar disease is infecting the early stages of the government’s domestic climate risk assessment currently underway.

There is a pattern here. Siloed thinking is a fatal mistake.