Tuesday, December 22, 2015

Stanford researchers' calculations reveal higher-than-expected global economic cost of climate change

New research finds that without climate change mitigation, most countries will see an economic downturn by 2100.
A study published in the journal Nature shows that the global economy will take a harder hit from rising temperatures than previously thought, with incomes falling in most countries by the year 2100 if climate change continues unchecked. Rich countries may experience a brief economic uptick, but growth will drop off sharply after temperatures pass a critical heat threshold.

The study, co-led by Marshall Burke, a professor of Earth system science at Stanford's School of Earth, Energy & Environmental Sciences, provides a clear picture of how climate change will shape the global economy.... The work was co-authored by two researchers from the University of California, Berkeley: co-lead author Solomon Hsiang, the Chancellor's Associate Professor of Public Policy, and Edward Miguel, Oxfam Professor in Environmental and Resource Economics.

"The data tell us that there are particular temperatures where we humans are really good at producing stuff," said Burke, who is also Center Fellow at the Freeman Spogli Institute for International Studies. "In countries that are normally quite cold - mostly wealthy northern countries - higher temperatures are associated with faster economic growth, but only to a point. After that point, growth declines rapidly."  That point, it turns out, is an annual average temperature of about 55 degrees Fahrenheit.

As average temperatures move past that mark, wealthy countries will start to see a drop-off in economic output. Poorer countries, mostly in the tropics, will suffer even steeper losses because they are already past the temperature threshold. This has the potential to widen the global inequality gap, Burke said.

Looking at existing research, the team found a puzzling mismatch between micro-level studies, which show negative impacts of hot temperatures on output in specific sectors such as agriculture, and macro-level studies, which at least in rich countries show limited impacts on economic output.

"Many very careful studies show clearly that high temperatures are bad for things like agriculture and labor productivity, even in rich countries," Burke said. "While these relationships showed up again and again in the micro data – for example, when looking at agricultural fields or manufacturing plants – they were not showing up in the existing macro-level studies, and we wanted to understand why."

The researchers suspected the problem was with the analysis, not the data, so they took a new approach.

Analyzing records from 166 countries over a 50-year period from 1960 to 2010, they compared each country's economic output in years of normal temperatures to that of unusually warm or unusually cool years. The data revealed a hill-shaped relationship between economic output and temperature, with output rising until the 55 F threshold and then falling faster and faster at higher temperatures. "Our macro-level results lined up nicely with the micro-level studies," Hsiang said.
Higher temperatures, lower growth

The team then sought to understand what this historical pattern might mean for the future global economy as temperatures continue to warm. "Many other researchers have projected economic impacts under future climate change," Hsiang said. "But we feel our results improve our ability to anticipate how societies in coming decades might respond to warming temperatures."
In a scenario of unmitigated climate change, the team's model shows that by 2100 the per-capita incomes of 77 percent of countries in the world would fall relative to current levels. By the team's main estimate, global incomes could decline 23 percent by 2100, relative to a world without climate change. Other estimates are twice as high. The likelihood of global economic losses larger than 20 percent of current income is at least 40 percent, and much higher in some scenarios.

These estimates are substantially larger than existing models indicate, a difference the researchers attributes to their updated and data-driven understanding of how countries have historically responded to temperature increases.

A common assumption among researchers has been that wealth and technology protect rich countries from the economic impacts of climate change, because they use these resources to adapt to higher temperatures.

"Under this hypothesis, the impacts of future warming should lessen over time as more countries become richer," Burke said. "But we find limited evidence that this is the case."

Burke's team found that, historically, rich countries did not appear to respond any differently to temperature change than poor countries.

"The data definitely don't provide strong evidence that rich countries are immune from the effects of hot temperatures," Hsiang said.  "Many rich countries just happen to have cooler average temperatures to start with, meaning that future warming will overall be less harmful than in poorer, hotter countries."
"Global non-linear effect of temperature on economic production"
by Marshall Burke, Solomon M. Hsiang & Edward Miguel
527, November 12, 2015; pages 235–239
Published online
paper currently available free of charge at:

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