I realise Stoat has already covered this, but I thought I would also briefly discuss it here. I posted a couple of tweets, that got quite a lot of responses, about the economic impacts of climate change, that tried to address a question that has bothered me (and others, it seems). Essentially, many economic analyses imply that even under quite substantial levels of warming, the economic impact of climate change will be ~10% of GDP and that, because of continued economic growth, this will occur in a world that is substantially richer than we are today. I realise that 10% of GDP is not negligible, but it also doesn’t seem consistent with the suggestion that we’re facing a climate crisis if we don’t soon substantially reduce our emissions. So, what’s going on here? Is it:
- The results from these economic analyses do indeed properly reflect the overall impact; the impact could be substantial (~10% of GDP) but we’ll be richer, can more easily deal with these impacts, and really shouldn’t be too concerned.
- Even though these economic analyses are reasonable, they’re really order of magnitude estimates, and so we should interpret ~10% as representing a large impact.
- Globally, these economic analyses are reasonable, but they largely ignore the distribution of the impacts; losses could be huge in regions that are poor and don’t contribute much to global GDP.
- The results from these economic analyses do indeed properly reflect the economic impact, but miss other substantive impacts that can’t easily be quantified.
- These results don’t really make sense if we end up warming by more than 3-4oC.
I should make clear that I’ve updated my points to include some suggested by other (H/T Andrew Dessler).
I don’t have a particularly good answer to my posed question. If pressed, I would go for a combination of 2, 3, and 4. It seems clear that there are large uncertainties, they clearly ignore some impacts that are difficult to quantify (the loss of coral reefs, for example), and probably under-estimate – or appear to – the human impact in regions that are poor. However, I still have a problem reconciling these type of estimates with the sense of urgency coming from others.
Maybe one solution is to give more weight to moral arguments (H/T Kyle Armour):
By what natural authority do we accrue the right to materially reengineer the only planet in the vast immensities of the universe known to harbor life?
On the other hand, maybe these economic analyses are still useful for guiding how we respond to climate change. For example, even though some of these analyses suggest that the impact could be modest, they do still suggest that there is a net benefit to emission reductions.
What I would really like is to better understand the conditions under which these economic analyses are regarded as reasonable. It seems clear that there are levels of warming beyond which the damage estimates are clearly nonsense (DICE, for example, suggests that 10oC of warming would produce damages of about 28% of GDP). However, for relatively low levels of warming, maybe they’re fine. Where is the actual boundary? Also, maybe it needs to be clearer as to the goals of such modelling. Is it really to try and determine the economic impact in 2100, or is it mostly to guide what we do in the next decade, or so?
Something that I posed during the Twitter discussion was whether or not one could sanity check these kind of estimates. In physics, one can often do a basic back-of-the-envelope type of calculation to check if the result from a more complex analysis actually makes sense. Is that possible in this context, or is it simply too complicated? If the latter, what does this imply? Should we simply trust the numbers that pop out of these calculations, or can we say “sorry, that doesn’t seem to make sense”? If the latter, how does one avoid motivated reasoning?
Again, I don’t have good answers to these questions, so I’ll stop there. I’ll post some links below, some of which are papers suggested by Genevieve Guenther, that I really should find time to try and read.
Costing the Earth: A Numbers Game or a Moral Imperative? (paper by Gerard Roe suggesting that we should give greater weight to moral arguments).
Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis (paper suggesting that the economic impact of ~4.2MoC of warming would be ~7% of GDP, but which does suggest that this is probably conservative because it ignores rare disasters).
On Modeling and Interpreting the Economics of Catastrophic Climate Change (paper by Martin Weitzman about fat tails).
Limitations of integrated assessment models of climate change (paper by Frank Ackerman suggesting that IAMs have some serious limitations).
Climate Change Policy: What Do the Models Tell Us? (paper by Robert Pindyck suggesting that IAMs have fundamental flaws).