IPCC Fourth Assessment Report: Climate Change 2007
Climate Change 2007: Working Group III: Mitigation of Climate Change

2.2.3 Irreversibility and the implications for decision-making

Human impacts on the climate system through greenhouse gas emissions may change the climate so much that it is impossible (or extremely difficult and costly) to return it to its original state – in this sense the changes are irreversible (Scheffer et al., 2001; Schneider, 2004). Some irreversibility will almost certainly occur. For example, there is a quasi-certain irreversibility of a millennia time scale in the presence, in the atmosphere, of 22% of the emitted CO2 (Solomon et al., 2007). However, the speed and nature of these changes, the tipping point at which change may accelerate and when environmentally, socially and economically significant effects become irreversible, and the cost and effectiveness of mitigation and adaptation responses are all uncertain, to a greater or lesser extent.

The combination of environmental irreversibility, together with these uncertainties (Baker, 2005; Narain et al., 2004; Webster, 2002; Epstein, 1980) means that decision-makers have to think carefully about:

a) The timing and sequencing of decisions to preserve options.

b) The opportunity to sequence decisions to allow for learning about climate science, technology development and social factors (Baker, 2005; Kansuntisukmongko, 2004).

c) Whether the damage caused by increases in greenhouse concentrations in the atmosphere will increase proportionally and gradually or whether there is a risk of sudden, non-linear changes, and similarly whether the costs of reducing emissions change uniformly with time and the depth of reduction required, or are they possibly subject to thresholds or other non-linear effects.

d) Whether the irreversible damages are clustered in particular parts of the world or have a general effect, and

e) whether there is a potential that these irreversible damages will be catastrophically severe for some, many or even all communities (Cline, 2005).

Just as there are risks of irreversible climate changes, decisions to reduce GHG emissions can require actions that are essentially irreversible. For example, once made, these long-lived, large-scale investments in low-emission technologies are irreversible. If the assumptions about future policies and the directions of climate science on which these investments are made prove to be wrong, they would become ‘stranded’ assets. The risks (perceived by investors) associated with irreversibility of this nature further complicate decision-making on abatement action (Keller et al., 2004; Pindyck, 2002; Kolstad, 1996; Sullivan et al., 2006; Hamilton and Kenber, 2006).

Without special actions by governments to overcome their natural inertia, economic and social systems might delay too long in reacting to climate risks, thus leading to irreversible climate changes. Ambitious climate-protection goals would require new investments (physical and intellectual) in climate-friendly technologies (efficiency improvements, renewables, nuclear power, carbon capture and storage), which are higher in cost than current technologies or otherwise divert scarce resources. From an economic point of view these investments are essentially irreversible. As the scale of the investment and the proportion of research and development costs increase, so the private economic risks associated with irreversibility also increase. Therefore, in the presence of uncertainty concerning future policy towards GHG emission reduction, future carbon prices or stabilization targets, investors are reluctant to undertake large-scale irreversible investments (sunk costs) without some form of upfront government support.