Business

Climate Change Poses Threat to Global GDP, Study Finds

New data reveals that global GDP per capita will decrease by 7.22 percent by 2100 if average global temperatures continue to rise. For several olive-producing countries in the Mediterranean basin, the figure may be much higher.

Increases in precipitation may have a negative effect on GDP, the study found
Aug. 29, 2019
By Isabel Putinja
Increases in precipitation may have a negative effect on GDP, the study found

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A recent study exam­in­ing the eco­nom­ics of cli­mate change has con­cluded that the phe­nom­e­non has the poten­tial to have long-term macro­eco­nomic impacts across the globe.

The work­ing paper, “Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis,” was pub­lished by the National Bureau of Economic Research (NBER) on August 19.

In a no-cli­mate action-sce­nario, we expect the aver­age U.S. cit­i­zen to lose about 10 per­cent of (his or her) income as a result.- Kamiar Mohaddes, econ­o­mist at the University of Cambridge

The study, which was con­ducted by a team of researchers from the University of Southern California, the University of Cambridge, the International Monetary Fund (IMF) and National Tsing Hua University in Taiwan, exam­ined the long-term macro­eco­nomic impacts of cli­mate change in 174 coun­tries around the world.

The study reveals that if aver­age global tem­per­a­tures con­tinue to rise by 0.04 degrees Celsius (0.07 degrees Fahrenheit) per year, global GDP per capita will decrease by 7.22 per­cent by 2100.

See more: Climate Change News

This is a “busi­ness as usual” sce­nario where mit­i­ga­tion mea­sures are not applied. However, if tem­per­a­ture increases are lim­ited to 0.01 degrees Celsius (0.02 degrees Fahrenheit) per year, which is in line with the Paris Agreement, the loss would amount to only 1.07 per­cent.

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By ana­lyz­ing data from these 174 coun­tries from 1960 to 2014, the researchers exam­ined how labor pro­duc­tiv­ity is affected by changes in tem­per­a­ture and rain­fall. They found that “per capita real output growth” is neg­a­tively affected by tem­per­a­ture changes, but this is less sig­nif­i­cant for changes in pre­cip­i­ta­tion.

While pre­vi­ous stud­ies have main­tained that global tem­per­a­ture increases have the most poten­tial for neg­a­tive effects in low-income coun­tries with hot cli­mates, this one reveals that cli­mate change will “affect all coun­tries, rich or poor, and hot or cold.”

“In our study, where we look at devi­a­tions of cli­mate vari­able and explic­itly model changes in the dis­tri­b­u­tion of weather pat­terns; that is not only aver­ages of cli­mate vari­ables but also their vari­abil­ity,” Kamiar Mohaddes, a co-author of the study and University of Cambridge econ­o­mist, told Olive Oil Times.

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“We find that devi­a­tions of cli­mate vari­ables (tem­per­a­ture and pre­cip­i­ta­tion) have neg­a­tive long-run growth effects for all economies, includ­ing the United States,” he added. “For instance, in a no-cli­mate action-sce­nario, we expect the aver­age U.S. cit­i­zen to lose about 10 per­cent of [his or her] income as a result — a sub­stan­tial loss.”

Not only do rising tem­per­a­tures and extreme weather events as a result of cli­mate change create finan­cial risks and pose a threat to eco­nomic growth to all coun­tries world­wide, this also affects worker pro­duc­tiv­ity and employ­ment.

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“Deviations of cli­mate vari­ables (tem­per­a­ture and pre­cip­i­ta­tion) from their his­tor­i­cal norm affect labor pro­duc­tiv­ity,” Mohaddes said. “This can happen, for instance, when it rains non­stop or there is a drought, or when the weather is exces­sively hot or cold. In these con­di­tions, work­ers may not be able to show up for work, or alter­na­tively they may take longer to finish a task (in freez­ing con­di­tions or exces­sive heat, they cannot oper­ate nor­mally).”

“Sometimes con­struc­tion projects are put on hold, supply chains are inter­rupted, or agri­cul­tural activ­ity is post­poned,” he added. “These are a few exam­ples of how labor pro­duc­tiv­ity or employ­ment levels are affected by cli­mate change.”

The extent of the loss when it comes to macro­eco­nomic effects can vary widely from one coun­try to the next. According to the data pre­sented in the work­ing paper, the U.S. faces a poten­tial loss of 10.52 per­cent. Canada stands to lose 13.8 per­cent; Switzerland 12 per­cent; India 9.9; Russia 8.93 and China 4.3 per­cent.

Looking at the fig­ures for olive-pro­duc­ing coun­tries, Greece could face a loss of 12.21 per­cent, 7.98 per­cent for Turkey, 7.01 per­cent for Italy, 6.30 per­cent for Spain, and only 0.53 per­cent for Tunisia.