1007. Economic Costs of Climate Change 

Today’s Pick Up features two recently published research articles that attempt to estimate the impacts of climate change on the global economy. 

Most global economic models that estimate climate change impacts are based on annual temperature data. The recently published paper in Nature (Kotz et al. 2024), on the other hand, estimates climate change impacts on economic growth, based on sub-national damages caused by temperature and rainfall variations and extremes, using extensive empirical observations from over 1,600 regions worldwide over the past 40 years. 
The result indicates that the world economy is destined to suffer an income loss of 19% from global warming due to accumulated greenhouse gases (GHGs) within the next 26 years, irrespective of future emission scenarios. This estimated climate damage exceeds the likely mitigation costs required to limit global warming to 2°C by a factor of approximately six over the short term, while the magnitude of the damage will depend on emission choices thereafter. 
Kotz et al. (2024) indicate that the predicted damages are mainly due to changes in average temperature, while the impacts are heterogeneous across the regions. For example, climate damages are projected for all regions except those at very high latitudes where average temperature is increasing at a faster pace than the rest of the world, while regions at lower latitudes with lower cumulative historical emissions and lower present-day income are expected to suffer most, reflecting the latter’s economic vulnerability to changes in temperature. 
Additionally, Kotz et al. (2024) highlight the prevalence of injustice in climate impacts in the context of the damages to which the world is already committed due to historical emissions and socio-economic inertia. In the near term, adaptation may provide an opportunity to reduce committed damages, while the benefits of mitigation should be felt from the mid-century. 

The other paper, recently published in Nature Climate Change (Waidelich et al., 2024), attempts to project the economic damages caused by increases in average temperature, along with variability in precipitation, temperature, and extreme weather. The study shows that under a +3°C scenario, global damages reach 10% of GDP, with poorer countries in low latitudes suffering most (up to 17%).  The additional impacts of variability and extremes relative to annual temperature damages are smaller, especially at lower latitudes. In turn, when estimating the temperature dose-response function, global economic damages are raised by about 2%, with higher economic tail risks. The study highlights the call for region-specific risk assessments and the integration of other climate variables for a better understanding of climate change impacts.

References

Kotz, M., Levermann, A. & Wenz, L. The economic commitment of climate change. Nature 628, 551–557 (2024). https://doi.org/10.1038/s41586-024-07219-0

Waidelich, P., Batibeniz, F., Rising, J. et al. Climate damage projections beyond annual temperature. Nat. Clim. Chang. (2024). https://doi.org/10.1038/s41558-024-01990-8

Contributor: IIYAMA Miyuki (Information Program)