Heating our climate damages our economies: Study reveals greater costs
than expected

Date:
August 19, 2020
Source:
Potsdam Institute for Climate Impact Research (PIK)
Summary:
Rising temperatures due to our greenhouse gas emissions can cause
greater damages to our economies than previous research suggested,
a new study shows.



FULL STORY ========================================================================== Rising temperatures due to our greenhouse gas emissions can cause
greater damages to our economies than previous research suggested,
a new study shows.

Scientists from the Potsdam Institute for Climate Impact Research (PIK)
and the Mercator Research Institute for Global Commons and Climate Change
(MCC) took a closer look at what climate change does to regions at the sub-national level, such as US states, Chinese provinces or French de'partments, based on a first- of-its-kind dataset by MCC. If CO2
emissions from burning fossil fuels are not reduced rapidly, a global
warming of 4DEGC until 2100 can make that regions lose almost 10% of
economic output on average and more than 20% in the tropics.


========================================================================== "Climate damages hit our businesses and jobs, not just polar bears
and coral reefs," says Leonie Wenz from PIK, one of the two authors
of the study. "Rising temperatures make us less productive which is
relevant in particular for outdoor work in the construction industry or agriculture. They affect our harvests and they mean extra stress and thus
costs for our infrastructure as for instance computer centres need to be cooled. By statistically evaluating climate and economic data from the
past decades, we found that the aggregated economic damages from rising temperatures are even greater than previously estimated because we looked
at the sub-national effects which provide a more comprehensive picture
than national averages." Damages from weather extremes would come on top Previous research suggested that a 1DEGC hotter year reduces economic
output by about 1%, whereas the new analysis points to output losses
of up to three times that much in warm regions. Using these numbers
as a benchmark for computing future damages of further greenhouse gas emissions, the researchers find significant economic losses: 10% on a
global average and more than 20% in the tropics by 2100. This is still a conservative assessment since the study did not take into account damages
from, for example, extreme weather events and sea-level rise, which will
also be substantial but are hard to pin down for single regions.

The new insight was made possible by building a novel MCC-dataset of
climate and economy for 1500 regions in 77 states around the world
that, for some regions, dates back to the 1900s. Data coverage is
best for industrialized countries, however, with economic information
lacking in particular for large parts of Africa. While the calculations
show a substantial impact on economic production, they do less so for
permanent economic growth reductions, which might be a reason for hope
once emissions are reduced. Importantly, the damages are distributed
very unevenly across the world with tropical and already poor regions
suffering most from continued warming whereas a few countries in the
North might even profit.

The economic cost of each tonne of CO2 emissions: 70-140 US-dollars
The findings have important implications for climate policy, and namely
CO2 pricing. "If you update the widely-used climate-economy model DICE developed by Nobel prize winner William Nordhaus with the statistical
estimates from our data, the costs of each tonne of carbon emitted to
society are two to four times higher," highlights the lead-author of
the study, Matthias Kalkuhl from MCC. "According to our study, every
tonne of CO2 emitted in 2020 will cause economic damage amounting to a
cost between 73 to 142 dollars in 2010 prices, rather than 37 dollars
shown by the DICE model. By 2030, the so-called social cost of carbon
will already be almost 30 percent higher due to rising temperatures."
By way of comparison: the carbon price in European emissions trading
currently fluctuates between 20 and 30 euros per tonne; the national
carbon price in Germany rises from 25 euros next year to 55 euros in
2025. These current carbon prices thus reflect only a small part of
the actual climate damage. According to the polluter-pays principle,
they would need to be adjusted upwards significantly.


========================================================================== Story Source: Materials provided by Potsdam_Institute_for_Climate_Impact_Research_(PIK).

Note: Content may be edited for style and length.


========================================================================== Journal Reference:
1. Matthias Kalkuhl, Leonie Wenz. The impact of climate conditions on
economic production. Evidence from a global panel of
regions. Journal of Environmental Economics and Management, 2020;
103: 102360 DOI: 10.1016/ j.jeem.2020.102360 ==========================================================================

Link to news story: https://www.sciencedaily.com/releases/2020/08/200819102815.htm

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