Stanford Calculations Reveal Higher-Than-Expected Global Economic Cost Of Climate Change

When thousands of scientists, economists and policymakers meet in Paris this December to negotiate an international climate treaty, one question will dominate conversations: What is the climate worth? A new study published in the journal Nature shows that the global economy will take a harder hit from rising temperatures than previously thought, with incomes falling in most countries by the year 2100 if climate change continues unchecked. Rich countries may experience a brief economic uptick, but growth will drop off sharply after temperatures pass a critical heat threshold.

The study, co-led by Marshall Burke, a professor of Earth system science at Stanford’s School of Earth, Energy & Environmental Sciences, provides a clear picture of how climate change will shape the global economy, which has been a critical missing piece for the international climate community leading up to the Paris talks. The work was co-authored by two researchers from the University of California, Berkeley: co-lead author Solomon Hsiang, the Chancellor’s Associate Professor of Public Policy, and Edward Miguel, Oxfam Professor in Environmental and Resource Economics.

“The data tell us that there are particular temperatures where we humans are really good at producing stuff,” said Burke. “In countries that are normally quite cold – mostly wealthy northern countries – higher temperatures are associated with faster economic growth, but only to a point. After that point, growth declines rapidly.” That point, it turns out, is an annual average temperature of about 55 degrees Fahrenheit. As average temperatures move past that mark, wealthy countries will start to see a drop-off in economic output. Poorer countries, mostly in the tropics, will suffer even steeper losses because they are already past the temperature threshold.

“Our research is important for COP21 because it suggests that these economic damages could be much larger than current estimates indicate,” Burke said. “What that means for policy is that we should be willing to spend a lot more on mitigation than we would otherwise. The benefits of action on mitigation are much greater than we thought, because the costs of inaction are much greater than we thought.”

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