Learning and Risk Exposure in a Changing Climate

Abstract:

Climate change is a gradual process most apparent over long time-scales and large spatial scales, but it is experienced by those affected as changes in local weather. Climate change will gradually push the weather people experience outside the bounds of historic norms, resulting in unprecedented and extreme weather events. However, people do have the ability to learn about and respond to a changing climate. Therefore, connecting the weather people experience with their perceptions of climate change requires understanding how people infer the current state of the climate given their observations of weather. This learning process constitutes a first-order constraint on the rate of adaptation and is an important determinant of the dynamic adjustment costs associated with climate change.

In this paper I explore two learning models that describe how local weather observations are translated into perceptions of climate change: an efficient Bayesian learning model and a simpler rolling-mean heuristic. Both have a period during which the learner’s beliefs about the state of the climate are different from its true state, meaning the learner is exposed to a different range of extreme weather outcomes then they are prepared for. Using the example of surface temperature trends, I quantify this additional exposure to extreme heat events under both learning models and both RCP 8.5 and 2.6. Risk exposure increases for both learning models, but by substantially more for the rolling-mean learner. Moreover, there is an interaction between the learning model and the rate of climate change: the inefficient rolling-mean learner benefits much more from the slower rates of change under RCP 2.6 then the Bayesian. Finally, I present results from an experiment that suggests people are able to learn about a trending climate in a manner consistent with the Bayesian model.