Climate Change Poses Threat to Global GDP, Study Finds

Summary

A recent study pub­lished by the NBER found that cli­mate change could lead to sig­nif­i­cant long-term macro­eco­nomic impacts glob­ally, with a poten­tial 10% loss in income for the aver­age U.S. cit­i­zen if no cli­mate action is taken. The study showed that if global tem­per­a­tures rise by 0.04 degrees Celsius per year, global GDP per capita could decrease by 7.22% by 2100, but if tem­per­a­ture increases are lim­ited to 0.01 degrees Celsius per year, the loss would be only 1.07%.

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.

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.

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.

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.

“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.

“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.

• NBER


• Science Daily