Climate Model Failure: Sensitivity, Uncertainty, and Risk Mispricing

Climate model failure refers to the systematic overstatement of climate sensitivity, misrepresentation of natural variability, and structural uncertainty embedded in general circulation models. These shortcomings distort projections used in financial stress testing, emissions pricing, and regulatory design. Misuse of high-end scenarios, inadequate representation of feedbacks, and poor regional performance have contributed to risk mispricing and policy overreach. Understanding these failures is essential for evaluating the reliability of climate forecasts, the validity of ESG-linked metrics, and the soundness of climate-driven economic planning.