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The week of December 15, 2025: A climate retraction, Ford’s debacle, the debt, and much, much more.
The week of December 15, 2025: A climate retraction, Ford’s debacle, the debt, and much, much more.
Bear with me, this is going to take a while.
In April 2024, Nature published a report entitled The Economic Commitment of Climate Change (often abbreviated as KLW24) by Maximilian Kotz, Anders Levermann, and Leonie Wenz. All three work at the Potsdam Institute for Climate Impact Research, an organization that may not be a household name — in normal households anyway — but it plays an influential role in the climate ecosystem, highly rated by those who rate such things and unembarrassed by advocacy (“science… for a safe tomorrow”). The trio concluded that the world was already on track to be 19 percent poorer in 2050 than it would have been without climate change. This ‘foregone’ GDP growth would rise to up to 60 percent in 2100 unless emissions are cut “drastically and immediately.”
Gloom plays well in Climateworld. As the AEI’s Roger Pielke has highlighted, the paper was widely cited, and “quickly found its way into important policy settings, including the U.S. Congressional Budget Office, the OECD, the World Bank, and the UK Office for Budget Responsibility.”
Perhaps most importantly, KLW24 was taken up by the Network for Greening the Financial System (NGFS), a grouping of a large number of central banks (including, amusingly, China’s) and supervisory authorities. More specifically, it became a crucial part of the fifth set of long-term climate scenarios issued by the NGFS on November 5, 2024. Such scenarios are part of a toolkit designed to help the financial sector — and its regulators — model future risks arising out climate change. But they have consequences now.
The greater those risks, the more capital that banks will be obliged to set aside for them. That may have broader economic consequences, but it will, in particular, make banks less willing to lend to, among other climate villains, fossil fuel companies. As far as the NGFS is concerned that is much of the point. A major objective of “green” finance, which extends far beyond the NGFS to include ESG advocates and a plethora of unelected and unaccountable organizations such as the now mercifully defunct Net Zero Banking Alliance.
And bankers may not wait for central bankers or other regulators to intervene. The Daily Telegraph recently reported that a number of leading British banks had used the NGFS research. They wouldn’t say whether this had affected lending or investment decisions, but it’s not unreasonable to think that they did:
The Bank of England said last year that banks were increasingly using climate forecasts to determine which businesses they lend money to.
This was partially down to bosses seeking to align with net zero, the Bank added. A research paper from the United Nations in 2020, drawn up in collaboration with Lloyds and 38 other banks, also said the impacts of climate change should be considered when lending to companies.
How that would create or preserve shareholder value is a mystery.
The NGFS’ new long-term climate scenario made grim reading. The authors of its predecessor concluded that if climate policy continued on its current path, global GDP in 2050 would be 5.4 percent lower than it would have been absent climate change. Now the forecast was of growth foregone of nearly 15 percent, an increase almost entirely attributable to the inclusion of a “damage function” based on KLW24. It’s worth remembering that this “loss” is relative, not absolute, something not always made clear in some of the press coverage it received, but as the NGFS wrote:
Assuming historical growth rates, the economy would grow by more than 300% by the end of the century. Thus, even after accounting for 30% damage, the global economy would still grow by 180% in such a scenario.
Nevertheless…
The ground was clearly being prepared for another turn of the climate policy ratchet.
But then, most unhelpfully, Greg Hopper of the Bank Policy Institute (“a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks”), whose earlier career featured a heavy focus on risk management, took a closer look at KLW24, and what he found was not pretty.
Hopper:
This paper reviews the new damage function in the Nature paper and finds no basis for its projections. The statistical procedure used to justify the new damage model is arbitrary and could easily have produced a damage function that would have predicted much smaller losses of global real income. Those much smaller loss projections should not be taken seriously either. In our assessment of the damage function, we found very limited statistical evidence for any causation between the climate variables and material economic damage and no statistical evidence for the purported influence of the temperature variables that drive almost all the economic damage.
Our findings are consistent with the current state of academic damage function research, which is highly uncertain at this point. One recent academic paper tested 800 plausible specifications of climate damage functions, finding that damages ranged from large economic benefits to large economic losses. With no academic consensus on climate damage functions, it is unclear why the NGFS would adopt the results of a single academic paper, especially given the massive ramifications for global economic growth.
Unclear? Maybe, but if I had to guess, these outlier findings were adopted so quickly and so uncritically because it gave the NGFS findings bleak — and striking — enough to advance a climatist agenda.
Unfair? Maybe, but in September 2024, two months before NGFS published its new long-term scenario, Nature had received a paper by Tom Bearpark, Dylan Hogan, and Solomon Hsiang that, writes Hopper, “proved that a data error in the Nature paper had incorrectly inflated the economic loss numbers of the damage function by about a factor of three.” The (eventually) published report (often referred to as BHH25) was indeed damning. Its authors calculated that KLW24’s results had been substantially distorted by “data anomalies” from Uzbekistan. Anomaly is a mild way of describing outlandish numbers that ought to have merited more checking than they did. Additionally, in BHH’s view, KLW had underestimated statistical uncertainty in their future projections of climate impacts.” After adjusting for this and other matters, KLW’s “central estimate” was nothing particularly new.
Did the NGFS know about these findings, but go ahead anyway?
Hopper:
The NGFS worked closely with the Nature paper modeling team and the Potsdam Institute to implement the damage function, and so it is puzzling why the NGFS would have been unaware of it.
And was the NGFS unaware of some problems that were revealed in the peer-review process or, for that matter, that Nature had received a critique of KLW24 in May 2024 (for a full chronology please turn to Pielke’s account here) by Christoph Schötz? In the version that was (eventually) published Schötz wrote that KLW24 “does not provide the robust empirical evidence needed to inform climate policy.”
Schötz is a colleague of K, L, and W at Potsdam. That he felt the need to speak out says something.
Wait, there’s more. Slowly, very slowly, Nature (which was almost certainly predisposed to believe paint-it-black climate studies) began to back away from KLW24, adding a footnote:
Readers are alerted that the reliability of data and methodology presented in this manuscript is currently in question. Appropriate editorial action will be taken once this matter is resolved.
Oh.
This was dated November 6, 2024, but according to Hopper went online at some point “after late December.” This would have been some weeks after he had published his paper challenging KLW24. Hopper writes that he sent this paper “to [KLW24’s] lead author and the Nature editors, even offered to submit a ‘matters arising’ or whatever they wanted, but they never replied.”
It was almost as if they didn’t want to hear a different opinion.
As for the NGFS, despite Nature’s footnote, it left its scenario unchanged. This was no small matter. For example, as Hopper explains, the European Central Bank (ECB) sets standards for climate risk management that banks are expected to meet. Being in breach of them can carry heavy fines. He adds that “the ECB endorsed the use of climate scenarios to meet regulatory expectations, noting that the most used scenarios are created by the NGFS.”
That carries with it the expectation that the NGFS will observe the highest standards when preparing those scenarios. That is hard to reconcile with its silence in the face of the growing — and from December 2024 public — doubts over KLW24. And that raises another question. Staff at central banks focused on this area must or should have been aware that warning lights were flashing. Did they say anything? “Are regulators,” asks Hopper, “putting their thumb on the scale, targeting a pre-determined conclusion rather than using the best scientific evidence?”
Judge that for yourself, but it seems to me that, at the very least, KLW24 benefited from the way that it amplified the climatist narrative. Despite its outlier findings, Nature gave it the benefit of the doubt, and then NGFS gave it the benefit of the doubt, and then central banks gave it the benefit of the doubt. Andmost of the media cheered. Groupthink, it’s a thing.
In August 2025, Nature published a “preprint” (a completed draft that has yet to be subjected to peer review) of a paper by KLW purportedly addressing the criticisms of KLW24. That same month, Nature also published the critiques by Schötz, which it had had for over a year, and the Bearpark team, which it had received some ten months before. To Pielke, these delays suggested that Nature had put off publishing the critiques of KLW24 until its authors had a chance to prepare a new paper and post it as a preprint. Perhaps the idea was to have a better debate.
The Washington Post’s Shannon Osaka took up the story, writing that KLW “corrected the Uzbekistan data, and also changed how their model controlled for underlying economic trends.”
And this, amazingly, was the outcome.
Using this altered method, they found results that agreed closely with their original findings. Instead of 19 percent damage by 2050, for example, the new analysis shows 17 percent.
Critics, recounts Osaka, were not convinced:
“Science doesn’t work by changing the setup of an experiment to get the answer you want,” Hsiang [one of the Bearpark team] said. “This approach is antithetical to the scientific method.”
And what did NGFS do in response to this? As Hopper, writing that August, related: Nothing.
That makes this a good moment to discuss how the NGFS, which was established at the Paris “One Planet Summit” (you missed it?) in December 2017 fits into a broader pattern of climate policymaking seeping into areas where it has no business going. Where central banks are concerned, the justification given for this is the potentially serious danger that climate change allegedly poses to the stability of the financial system. However, as economist John Cochrane and others have shown, there is no such danger (I should stress that this is not the same as “denying” that climate change could be, more generally, a problem). This is why others emphasize the need for everyone, banks, central banks, everyone, to battle climate change’s supposedly existential threat. And then there are the needs of Lagarde family.
Asked whether the pandemic could dilute the importance of green issues, Christine Lagarde, then and now the President of the ECB, said that “those who would be tempted by that option would live to regret it.” She added: “I have children, I have grandchildren. I just don’t want to face those beautiful eyes, asking me and others: ‘What have you done?’”
#Science.
But whatever the given reason, the real objective behind the greening central of banks was, as alluded to above, to constrain the flow of capital to companies that stood in the way of the target of net zero greenhouse gas emissions by 2050.
Good news, Americans! The Fed, which had joined the NGFS shortly before President Joe Biden took office, left it shortly before he departed, stating that its work had “increasingly broadened in scope, covering a wider range of issues that are outside of the Board’s statutory mandate.” The timing may have been politically convenient, but the Fed Chairman’s concerns, expressed in the context of a related debate in 2024, were well put:
“Policies to address climate change are the business of elected officials and those agencies that they have charged with this responsibility. . .. The Fed has received no such charge.”
The NGFS is part of a transnational technocracy that, like much of Big Climate, has no proper sense (at least to those who believe in democracy) of where the limits of its power should lie. The significance of the KLW24 saga was that on this occasion, it was caught out.
On December 3, 2025, Nature finally retracted the paper. Its authors acknowledged that the changes it needed were “too substantial for a correction.” Instead, they have produced an updated version that will be submitted for peer review. They thanked BHH and Schötz for bringing the issues they raised to their attention. There were no thanks for Hopper.
Reacting to this, Pielke wrote that:
Given its central importance in regulation of the global financial system, one might think that the retraction of KLW24 would result in immediate action by the NGFS to correct their flawed damage function. But no.
For its part, the NGFS responded to today’s retraction by asking users of its recommended damage function to note the retraction, and presumably, to just carry on…
NGFS’s response included this:
The NGFS scenarios are not forecasts, but… tools intended to illustrate plausible pathways. Users should be aware of the retraction of the Kotz et al. (2024) paper when interpreting and applying Phase V results, alongside the broader limitations of physical risk estimates already detailed in NGFS documentation.
For upcoming iterations of its scenarios, the NGFS would “benefit from the expertise of a newly established independent scientific advisory committee.”
Better late than never, I suppose.
According to the Wall Street Journal (December 3), Leonie Wenz, “W” in KLW, “noted that, despite the retraction, the conclusions of her group’s study are consistent with other research showing climate change has substantial effects on macroeconomic productivity, and that those impacts outweigh the costs of climate change mitigation.” Christoph Schötz, KLW24’s Potsdam critic fell somewhat back into line:
“There is a broad scientific consensus regarding the severe negative economic effects of climate change,” said Schötz, who added the retraction “does not alter that reality.”
The words “substantial” and “severe” are doing a lot of work here.
The New York Times’ Lydia DePillis quoted Lint Barrage, chair of energy and climate economics at ETH Zurich, a university focused on science and technology:
It can feel sometimes, depending on the audience, that there’s an expectation of finding large estimates…If your goal is to try to make the case for climate change, you have crossed the line from scientist to activist, and why would the public trust you?
Indeed. The harnessing of #science in the interest of a political agenda and with the connivance of scientists, has been immensely damaging. For the consequences look no further than the ascent of charlatans such as RFK, Jr., once (?), incidentally, a ferocious climatist.
DePillis:
Noah Kaufman, a senior research scholar at Columbia University’s Center on Global Energy Policy who worked in the Biden White House, believes studying specific questions — like how to decarbonize while keeping electricity affordable — is more useful than projecting macroeconomic impacts decades down the road.
“There are just a lot of examples in the world where we do recognize that there are large risks, but we don’t pretend we can optimize our response to them,” Mr. Kaufman said. “We just try to avoid them in a reasonable way.”
“Amen,” agrees Pielke.
Note: The last few lines of the first paragraph have been edited to make it more clear that, according to KLW24, the world was already on track to be 19 percent poorer than it would have been without climate change. The “drastic and immediate” cuts would be required to head off up to 60 percent of foregone GDP by 2100.
The Capital Record: Sound & Vision
We released the latest of our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which is hosted by financier David L. Bahnsen makes use of another two formats to deliver Capital Matters’ defense of free markets. The original podcast continues, but if you want to watch David talk, please click on the YouTube link.
The 274th Episode (Podcast/YouTube)
Making America Crony Again
If tariffs are “making us rich,” and if tariffs are “beautiful,” and if tariffs are “finally making things fair again,” and if tariffs are everything the administration has told us they are, why have there been exemptions, exclusions, and carveouts on $1.7 trillion of imports so far? Don’t get me wrong — I would favor excluding tariffs on 100 percent of imports. But the question we address on Capital Record today is why we have exempted so many special parties and particular products if tariffs are such a force of good? As you will see, the question answers itself.
The 275th Episode (Podcast/YouTube)
The Common Grace in Scott Galloway’s Wisdom for Young Men
Scott Galloway is no conservative, and I am not sure he would like me nearly as much as I like him. But despite his professed atheism and center-left political leanings, a certain common grace has enabled Galloway to become a counter-voice in today’s responsibility-averse culture. His new book, Notes on Being a Man, offer a few truisms that are desperately needed, desperately lacking, and profound for their counter-cultural tenor. In today’s Capital Record, we will look at how this message may be the lowest hanging fruit for a free and virtuous society in this current societal moment.
The Capital Matters week that was . . .
Inflation
There is no sign that the U.S. is headed toward 2 percent inflation, the Fed’s supposed target, making its decision to cut rates a curious one (even allowing for labor market uncertainty) …
Superficially (and perhaps even actually) today’s inflation data was encouraging. The CPI was up 2.7 percent (year-on-year) for November, and “core” inflation (excluding food and energy) came in at 2.6 percent. These numbers (conditions and exceptions apply) showed some slackening of the inflation rate after some disappointing months. The headline numbers came in below expectations of around 3 percent…
This week’s release of the latest Consumer Price Indices underscores the one issue area where polls consistently show President Trump performing particularly badly. It isn’t immigration, it isn’t trade, and it isn’t even the overall handling of the economy. It’s the cost of living, or inflation…
Ford
There were a number of clues that might have suggested to Ford executives that they were on the wrong track when it came to the company’s massive investment in EV production. The first was that EVs were so far from being ready for mass market acceptance that buyers had to be bullied and/or bribed to buy them. The second was that, as might be expected in the case of the introduction of a technology that was more top-down than bottom-up, the charging infrastructure to support it, even when it was in place, was not ready for prime time. The third …
For the Trump administration not to have reversed course would have been an example of the sunk-cost fallacy at work (even if many of the costs were borne by third parties). The attempt to switch car buyers to opt for a technology that was not, so far as the mass-market and the backing infrastructure was concerned, ready for prime time was an example of mandated malinvestment or, if you prefer, central planners doing what they do…
From Axios:
“Despite initial high demand, F-150 Lightning buyers quickly learned that towing a boat or trailer with an electric pickup truck dramatically reduced their driving range.”
I don’t have a truck, a boat, a trailer, or even a car, but to me this would seem to be a flaw….
Electric Vehicles
One of the more effective (seeming) techniques of the central planners steering — or attempting to steer — the green “transition” was the idea of its inevitability. This was the future. Get aboard! Gas cars = horse and buggy. Slow (and sometimes unreliable) to charge EVs = the radiant future.
That is not exactly how things are working out…
Entitlements
I wish that conservatives who are serious about the well-being of younger Americans would prioritize the reforming of the largest and most distortionary redistribution scheme in modern America. That scheme transfers massive amounts of wealth from the relatively young and relatively poor to the relatively old and relatively wealthy through Social Security and Medicare. Denouncing this unfairness is far less popular than lamenting cultural decline or indulging in nostalgia about the past. Yet failing to confront it will only exacerbate the very problems people believe we face today…
Healthcare
Do you know how much your healthcare cost last year? Probably not — almost no Americans do. And that, ironically, is the primary reason that health care costs are so high. Yet debates over health care policy tend to overlook this…
AI
Most people welcome economic growth, but Bernie Sanders hates it. As they say, there’s no accounting for taste.
The Vermont socialist has come out against data centers, the mass computing facilities essential to the development of artificial intelligence.
There are all sorts of NIMBY-type reasons for local residents to oppose data centers — they use a lot of energy and water, they are noisy and unsightly — but Sanders is against them on principle…
The Debt
There is another mechanism of fiscal dominance, however, and it is even more blatant: debt monetization. This occurs when a central bank purchases newly issued debt from the government. Instead of borrowing money from the American public, which simply moves existing money around the economy, the government would borrow from the Fed, which creates new money out of thin air. Monetizing the debt is, arguably, even more inflationary than artificially lowering interest rates, as rate cuts only affect the total supply of money indirectly if they induce new borrowing. Debt monetization, by contrast, involves the Fed injecting new money directly into the financial system…
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