A paper by the National Bureau of Economic Research suggests that each degree of global heating could reduce global GDP by 12%.
A new paper written for the National Bureau of Economic Research (NBER) suggests that the global economic cost of climate change could be around six times higher than previous estimations.
The paper, written by Northwestern economics professor Diego Känzig and Harvard economics professor Adrien Bilal, suggests that every one degree of atmospheric warming reduces global GDP by 12%.
It uses global heating data cross-referenced against aggregated national GDPs to come to a higher figure. The authors believe that this model provides a more complete picture, as many of the shocks, including extreme wind and precipitation, are affected by global conditions rather than localised heating.
It also places the social cost of carbon (SCC) at over $1,000/tCO2. This global measure estimates the economic damage caused by every tonne of carbon emitted and has historically been set far lower. According to the authors, their own calculations would only place the SCC at $151/tCO2 if evaluating local rather than global temperature shocks.
What does this mean for global economies?
The findings of this paper are clearly worrying as they suggest the threat to markets posed by climate change is significantly higher than previously quantifiable. The authors of the paper describe the impacts of a 1°C as “of the same magnitude as the growth impacts that typically occur after severe banking or financial crises,” and the long-term impacts of climate change as “comparable to the economic damage caused by fighting a war domestically and permanently [italics theirs].”
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