Effects Of Global Warming On The Economy – Ten Facts About Climate Change Economics and Climate Policy A joint report by The Hamilton Project and the Stanford Institute for Economic Policy Research
Ryan Nunn Ryan Nunn Associate Vice President of Applied Research for Community Development – Federal Reserve Bank of Minneapolis @ryandnunn Jimmy O’Donnell Former Senior Research Assistant – Hamilton Project @JFOdonnell13 Jay Shambaugh Jay Shambaugh Secretary of Global Affairs – US Department of Treasrencebry @JayCSsuham H Golder, LHG Lawrence H. Golder Senior Fellow – Stanford Institute for Economic Policy Research (SIEPR) Charles D. Kolstad and CDK Charles D. Kolstad Senior Fellow – Stanford Institute for Research (SIEPR) Xianling Long XL Xianling Long Research Associate – Stanford Institute for Economic Policy Research (SIEPR) )
Effects Of Global Warming On The Economy
The world’s climate is already changing exponentially due to increasing greenhouse gas (GHG) emissions. These developments, as well as anticipated future disruptions, prompt further investigation into the nature of the problem and potential policy solutions. This paper aims to provide a more informed summary of the two from an economic perspective and focus on how important climate goals can be achieved at the lowest possible cost.
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Great uncertainty surrounds future climate change and the extent of biophysical impacts of such change. Despite the uncertainty, climate scientists have reached a strong consensus that unless action is taken to significantly reduce greenhouse gas emissions, climate change will be significant and affect many of Earth’s physical and biological systems. Central or median estimates of this effect are significant. In addition, there are significant risks associated with low probability but potentially catastrophic consequences. Although a focus on interim results only requires efforts to reduce greenhouse gas emissions, economists argue that the uncertainty and associated risks justify more aggressive policy action than would otherwise be justified (Weitzman 2009; 2012).
Scientific consensus is expressed in summary documents recommended every few years by the UN-backed Intergovernmental Panel on Climate Change (IPCC). These documents describe the expected outcomes of alternative greenhouse gas modeling scenarios (RCPs) (IPCC 2014). Each of these RCPs represents a different type of greenhouse gas over the coming century, with higher numbers corresponding to higher emissions (see Box 1 for more on RCPs).
The projected trajectory of greenhouse gas emissions is critical to accurately predicting the physical, biological, economic, and social impacts of climate change. RCPs are scenarios selected by the IPCC that reflect scientific consensus on potential greenhouse gas emissions and concentrations, air pollutant emissions, and land use patterns in 2100. Estimates and Analysis. Below we describe RCPs and some of their assumptions:
The IPCC does not assign probabilities to these different emission pathways. Clearly, such pathways will require a number of technological and political changes. Implementation of RCP 2.6 and 4.5 will likely require significant technological advances and policy changes. It seems highly unlikely that global emissions will be specifically addressed in RCP 2.6; Annual emissions are projected to begin declining in 2020. In contrast, RCP 6.0 and 8.5 present scenarios in which future emissions follow past trends with minimal changes in policy and/or technology.
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The four RCPs have different effects on global warming. Figure A shows the projected temperature increase associated with each RCP scenario (compared to pre-industrial levels). Many scientists have argued that it is important to avoid a temperature increase of more than 2°C or even 1.5°C – a large increase in temperature would cause significant biophysical impacts and associated costs to human well-being. It is worth noting that economic assessments of the costs and benefits of policies to reduce CO2 emissions do not necessarily suggest policies that limit temperature rise to 1.5°C or 2°C. Some economic analyzes suggest that these warming targets would be too stringent, meaning that the economic sacrifices would outweigh the climate-related benefits (Nordas 2007, 2017). Additional analyzes support these findings (Stern 2006). The no-policy or no-policy scenarios (RCP 6.0 and 8.5) could increase the global average surface temperature by 2.9-4.3 degrees Celsius by the end of this century. One of the warming consequences of these scenarios is that sea levels will rise by 0.5 to 0.8 meters (Figure B).
The rate of climate change is a function of the accumulation of CO2 and other greenhouse gases in the atmosphere, and this accumulation represents the accumulated amount of emissions at any given time. The contribution of a given country or region to global climate change can therefore be measured in terms of total emissions.
Until the 1990s, historical responsibility for climate change was largely attributed to more industrialized countries. 1850-1990 the US and Europe alone accounted for nearly 75 percent of total CO2 emissions (see Figure C). Such historical responsibility has been a key issue in the debate over how much of the burden of reducing current and future emissions should fall on the shoulders of developed and developing countries.
Although the United States and other developed countries are responsible for much of the current excess CO2 concentration, the relative share and responsibility is changing. in 2017, since 1850, the US and Europe have emitted only 50 percent of total CO2 emissions into the atmosphere. One reason for this rapid decline (as shown in C and D) is that CO2 emissions from China, India and other developed countries have grown faster than emissions from developed countries (even though the US has the world’s highest per capita emissions rate among large economy, far ahead of China and India [Joint Research Center 2018]). Therefore, it seems likely that efforts to reduce emissions will be necessary both for historical sources, the US and Europe, and for newly developed countries such as China and India to avoid the negative effects of climate change.
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The commitments of the parties under the Paris Agreement mean a significant reduction in emissions, but not enough to prevent warming by 2 degrees
The future of climate change may look bleak given recent increases in global emissions, as well as potential future increases in emissions, warming and sea level under RCP 6.0 and 8.5. If no climate policy action is taken, the annual growth rate of emissions will increase and keep temperatures below 1.5°C to 2°C (Figure E). As mentioned earlier, cost-benefit analyzes of different economic models lead to different conclusions about whether it is better to limit the temperature increase to 1.5°C or 2°C (Nordhaus 2007, 2016; Stern 2006). Taking action to combat climate change is called “current policy” in Figure E (including policy commitments prior to the 2015 Paris Agreement). A comparison of “no climate policy” and “current policy” shows that cutting emissions under current policy will lead to a global temperature decrease of about 1°C by the end of the century. Much of this low-emission journey can be attributed to the actions of states, provinces and municipalities around the world.
Further reductions are planned under the 2015 Paris Agreement, under which 195 countries pledged to take further action. If Paris Agreement commitments are met, global temperatures in 2100 will be 0.5°C lower than “current policy” and about 1.5°C lower than “no-climate policy” (see Figure E). Although this can be seen as a positive outcome, the negative view is that this policy will still increase temperatures by 2.6–3.2 cm above pre-industrial levels by 2100, well above the 1.5 or 2.0 °C targets, which became the cornerstones of politics. . discussion
In the following fact sheet, we describe the costs of climate change to the United States and the world, as well as possible policy solutions and associated costs.
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The physical changes described in the introduction will have a major impact on the American economy. Climate change will affect agricultural productivity, mortality, crime, energy consumption, storm activity and coastal flooding (Hsiang et al., 2017).
Figure 1 focuses on the economic costs of the various increases in total temperature caused by climate change in the United States. It is immediately clear that the economic costs of limiting global warming (above pre-industrial levels) through technological and political change will vary widely. For 2°C warming by 2080–99, Hsiang et al. (2017) project that the United States will experience an annual GDP loss of 0.5 percent between 2080 and 2099 (solid line in Figure 1). Conversely, if global warming were to reach 4°C, the annual loss would be about 2.0 percent of GDP. Importantly, these effects are disproportionately magnified as temperature increases: in the United States, mortality increases and employment changes.