Climate Change Is Going to Be Expensive—For Everybody

Wired - Nick Stockton

A farmer examines his wheat field which failed due to drought in Rochester, Australia. Jason South/Getty Images

Hot weather sucks. Crops droop. Work slows down. People get testy. And it’s bad for business.
So bad, in fact, that higher temperatures from climate change are going to be an economic gut punch for many countries, according to a paper published today in Nature. The poorest countries—most of which are also already pretty warm—will suffer the most. But even rich countries with their cubicles and air conditioning are going to feel the burn.
Climate change will hit every level of an economy. Mentally and physically people work worse when they are hot. Rising seas and fiercer storms chew up infrastructure. And agricultural effects like crop failures reach far beyond borders. But all that stuff is years away, right?
Wrong. As deniers like to say (maybe even in the comments!), climate is always changing. And it turns out that these changes show up in the economic record. The new study compared annual temperature to annual GDP for every country. “What we found is that temperature has played an important role in shaping GDP output in the last 50 years,” says Marshall Burke, economist at Stanford University and co-author of the study.
Of course, the relationship between temperature and GDP isn’t linear. The study found that economic growth has a sweet spot: Around 55˚F. If the average annual temperature falls above or below that, GDP starts to taper off—slow at first, then very fast. “The graph looks like a strong inverted U,” says Edward Miguel, economist at UC Berkeley and another co-author of the study. At either end, the GDP remains fairly stable between 32 and 77 degrees F, but drops rapidly beyond those boundaries.
This means that how poorly your country fares under climate change depends on its starting average temperature. “At colder temperatures, say Northern Europe, these countries grew a little bit faster when temperatures were warmer,” says Burke. By comparison, much of the developing world is already pretty warm, so its prospects are pretty grim.
But wait, is Northern Europe going to get richer because it gets warmer, or because it’s already rich? “This is one thing we tried to be really careful with,” says Burke. In their statistical analyses, he and his co-authors controlled for things like preexisting wealth. Temperature is only one variable affecting GDP. “Culture matters, institutions matter, policy choices matter,” says Burke. “What we do find is looking historically, temperature matters a lot.” Which is important if the future world responds to temperature changes like the past world has.
And not all rich countries are going to get richer. Part two of the study takes historical correlations between temperature and GDP and projects them forward under different climate models. In them, the economic wealth of countries like the US or China can’t compensate for their latitudinal girth. Both fare poorly in the “business as usual” emissions scenario explored in the study. “There will still be a number of days where Alabama or Texas are really hot, even if all of the US is still kind of cold,” says Miguel. And over the course of the year, as the years go on, the overall area of the US experiencing extremely hot days will increase. GDP suffers accordingly.
Previous attempts to put climate change in terms of GDP have tripped over the jump from micro to macro. For example, how do a heat-struck worker in Arizona and a failed soy crop in Kansas and a stronger-than-average hurricane in Louisiana influence economic performance at a national level? In trying to add up all those microeconomic effects, studies can under- or overstate an inputs importance, or leave it out completely.
This paper skips past all that, and simply looks at average temperature and GDP. “This is a very significant study,” says Jonathan Harris, economist from Tufts University. “It’s based on real data from 1960 to 2010, not just hypothetical projections.”
Their verdict on how climate change will affect the global economy? “Overall economic production would fall by about 23 percent by 2100 if climate keeps changing under the current models,” says Miguel. That is a huge pile of money that never gets made; the deficit shared between countries both rich and poor.
Some argue that the first world will buffer itself against climate change with technological innovations—air conditioning is credited with saving the American South’s economy, and agricultural companies are already breeding heat resistant crops. But historically—and based on this analysis—that hasn’t been and won’t be true. “If you look back to the 1960s to now, any subset of time between now and then shows a consistent pattern of temperature correlating to GDP,” says Matthias Ruth, economist at Northeastern University. Which means that so far, innovation hasn’t done squat. “And as climate continues to change, keeping pace becomes more difficult, and we will fall ever more behind,” says Ruth.
This study put an even greater burden curbing international emissions. The world still has time to build a less dire future: The upcoming Paris emissions talks seem like the best time and place for a global wheel yank. But right now, the science is looking pretty dismal.

Climate Change Slams Global Economy, Study From Stanford And Berkeley Shows

Fairfax - Eric Roston

Without a track record of adapting to warmer temperatures, signs are we are setting ourselves up for suffering. Photo: NASA

Climate change could cause 10 times as much damage to the global economy as previously estimated, slashing output by as much as 23 per cent by the end of the century, a new research paper from US universities Stanford and Berkeley finds.
Looking at 166 countries between 1960 and 2010, the researchers identified an optimal average annual temperature that coincides with peak productivity. It's 13 degrees celsius, or approximately the climate of San Francisco's bay area (Sydney's mean temperature last year was 19.3 degrees).
Climate change could cause 10 times as much damage to the global economy as previously estimated, slashing output by as much as 23 per cent by the end of the century, a new research paper from US universities Stanford and Berkeley finds.
Looking at 166 countries between 1960 and 2010, the researchers identified an optimal average annual temperature that coincides with peak productivity. It's 13 degrees celsius, or approximately the climate of San Francisco's bay area (Sydney's mean temperature last year was 19.3 degrees).
Countries in the tropics, already hotter than this optimal temperature, are likely to face the most dramatic economic pain from warming, found the study, published in the latest issue of Nature. Countries at or just past the 13-degree annual average, like the US, China, and Japan, may be increasingly vulnerable to losses as the temperature warms. Northern countries well below the ideal average may see benefits as opportunities open up for agriculture and industry.
But this was the least robust finding. And even if the warming improves the lot of Scandinavia and Canada, such nations may not have many healthy trading partners left as others suffer. Also, higher temperatures in northern countries don't take into account changes in precipitation, more extreme weather, and the many other risks in a warming world.
The authors made a clever end run around the biggest problem at the core of climate science: There's only one Earth. Scientists usually like to run "controls," situations that have identical conditions to the experiment except for the one thing being studied. Unfortunately for climate scientists, there's no second Earth, filled with identical people doing identical things, where greenhouse gas emissions aren't a problem.
So the study looks at national temperature records through time. Instead of studying a warming Nigeria and a control Nigeria, the scientists compared Nigerian economic output in average years with that in warming years.
"If you have a lot of data on a lot of countries in a lot of years, that allows you to start to distinguish the particular role of temperature in economic performance," said Stanford's Marshall Burke, the co-lead author.
Once they calibrated this analysis, the researchers took the second step, applying it to the mostly widely accepted climate change scenarios. They found that if the economies continue to respond to heat the way they have in the past, most of the world is in for a rough ride.

This map shows how higher average annual temperatures from climate change may disproportionately impact economic growth around the world. Illustration: Burke, Hsiang, Miguel; Nature

What they are not doing, Burke said, is making an argument that temperature is necessarily the most important factor driving national economies.
"Climate is not fate," he said. "Countries can do a lot, and there many other factors beyond temperature that matter," such as geography, culture, and governance institutions.
Data from the study may challenge some assumptions made in computer models of climate change and economics. So-called integrated assessment models include calculations of a "damage function," which informs how bad, or benign, various changes might turn out. The damage function suggested by the new data is five to 10 times as high as in commonly used models.
William Nordhaus of Yale is the creator of the Dynamic Integrated Model of Climate and the Economy, probably the most commonly used of the three major models. He has seen the new Nature paper but said he would withhold judgment until the statistical analysis of the data has been tested.
"Their findings are startling," said Trevor Houser, an energy climate expert at the Rhodium Group, a research firm. "In their base-case estimate, the global economic price tag is more than 20 per cent of GDP, several times higher than previous estimates."
If the study holds up, it has the potential to influence policy in a couple of ways.

This graph projects the economic impact of climate change on the world
economy through 2100. There is a 63 per cent likelihood that GDP
will fall more than 10 per cent, a 51 per cent chance it will fall more
than 20 per cent, and 12 percent odds it will fall by more than half,
according to the study.
Illustration:Burke, Hsiang, Miguel; Nature

Rational policymakers typically weigh the costs of climate policy to the economy-carbon taxes, fuel efficiency standards, subsidies-against the projected costs of doing nothing, informed assumptions in the damage function of the climate-economic models. A dramatically higher damage function changes the cost/benefit analysis and makes potential policies that looked expensive yesterday much cheaper by comparison.
Another takeaway from the study is that over the last six decades, economies haven't adapted well to hotter temperatures. "We're optimistic on adaptation and its long-run potential," Burke said. "Looking historically, we don't see a lot of evidence that we're good at that."
A cliché repeated in some scientific circles suggests that there are three possible responses to climate change: mitigation (the word wonks like to use instead of prevention), adaptation, and suffering.
If the new study means our mitigation efforts are even weaker than previously thought, and we don't have a proven track record of adaptation, are we setting ourselves up for suffering? "That's exactly right," Burke said. "That's exactly right."

The Countries Where Global Warming Will Shrink Bank Accounts

PBS NewsHour - Nsikan Akpan

A new study from Stanford pinpoints the best annual temperature for getting the job done.
Photo by H. Armstrong Roberts/ClassicStock/Getty Images

It’s no secret that summer lends itself better to beaches and barbecues than actual work. Yet the instinct to shirk work in hot weather is more than a summer slowdown. It’s a broad phenomena that may cripple some nations as global warming progresses.
A new study from Stanford University has pinpointed the optimal annual temperature for economic productivity, and it’s this: 55.4 degrees Fahrenheit, or 13 degrees Celsius. The researchers show that when the climate exceeds this temperature, the country’s economic output drops precipitously. Based on their model published today in the journal Nature, this pattern has held steady for more than 150 countries, affecting both rich and poor, for more than half a century.
If global warming isn’t checked, the team expects average global incomes will be slashed by a quarter by 2100. So whether you’re an Indonesian rice farmer baking in the hot sun or a tech jockey sitting in a cool Silicon Valley office, you can expect your economic prosperity to decline.
“The results indicate that societies will need to adapt in ways that are likely to be expensive, or [they will] face even greater damages in terms of lost GDP,” said economist Michael Greenstone of the University of Chicago, who wasn’t involved in the project.
Stanford economist Marshall Burke and his colleagues created this new projection for the future by treating 166 countries like patients getting regular health checkups.
The team isolated the annual temperatures of each country from 1960 to 2010, and then looked at how that country’s economy performed during each of those years. By comparing warm years to normal years, the team was able to chart how individual economies respond to temperature.

A prediction for how gross domestic product (GDP) will change across the globe by 2100. Colder countries, like Canada, will see an economic boost with climate change, while most tropical nations will witness a drop. This model assumes a “business as usual” global warming scenario, wherein unmitigated climate changes raises temperatures by 4.3 degrees Celsius (8 degrees Fahrenheit) by the end of the century. Photo by Burke M, Hsiang SM and Miguel E., Nature, 2015.

Even when accounting for cultural differences, technological innovations, political upheavals, and economic atom bombs like global recessions, these researchers found an optimal temperature — again, 55.4 degrees Fahrenheit — that, in Burke’s words, “is really good at producing stuff around the world.”
“What we see is it matters less if you’re rich or poor now. It matters more if your [annual] average temperature is hot or cold,” Burke said. “If your country’s temperature is cooler than [55 degrees Fahrenheit], then global warming might help you. If your average temperature is hotter, a little bit of warming might hurt you.”
On a small scale, it’s easy to see how temperatures could impair industries like outdoor construction or agriculture. A drought during a growing season can wipe out crops, whether you’re a midwestern farmer in the U.S. or in Sub Saharan Africa.
But by examining the macroeconomics of climate change, the findings by Burke and his companions support a budding phenomena wherein even white collar jobs in air-conditioned offices will feel the burn of global warming. Prior research in India, for instance, suggests that worker productivity in textile mills drops by “1 to 3 percent per degree Celsius,” despite limited heat stress in the factories. Meanwhile, automobile assembly lines in the U.S. slow down when temperatures outside become too hot.

Photo by moodboard/via Getty Images

“We are already experiencing the economic impacts of climate change — heatwaves, for example, are increasing health costs and employee absenteeism,” economist Thomas Sterner of the University of Gothenburg wrote in accompanying commentary also published today by Nature.
The explanations for the decline in white-collar industries remain unclear, Burke said. What we do know is society gets a little crazy when it’s hot. Fatal car accidents and violence escalate. The rate of heart attacks spikes. Sleep might also be a factor. Burke’s team is currently looking into how sleep quantity and quality dictate economic output on a broad scale.
“It’s an intuitive idea, and we’re searching for quantitative evidence at the moment,” Burke said. Like an itchy, uncomfortable sweater, global warming might simply aggravate society by building collective stress among groups of people.
Until today, the conventional wisdom was that the economic burden of global warming would primarily be felt by poor nations. A seminal study in 2008 drew the relationship between temperature and economic output as a straight line. “The higher temperature, the bigger the costs,” Sterner writes, which meant that low-income nations would be burdened heavily in the future, given most reside in warm climates.

Cornfields during a drought in Tanzania. A 2012 study from MIT predicts that Sub Saharan Africa will witness a decline in the yields of its most common crops over the next century. Photo by Dennis K. Johnson/via Getty Images

Sterner writes that by not assuming a linear relationship, the new model from Burke’s team paints a more accurate picture. It can account for nuanced, micro-level responses between economic productivity and temperature.
As a country’s average temperature gets hotter and extends further past the 55-degree Fahrenheit threshold in Burke’s model, economic productivity fares worse. Poor countries would still suffer the brunt of unmitigated climate change over the next century, but rich countries take a hit too. The annual temperatures for nations like China and the U.S. already hover around the 55 degree-Fahrenheit cliff, so they might witness Overall, 77 percent of the countries surveyed could be poorer by 2100 due simply to global warming.

Temperature effects on GDP over time for nine regions. Black lines are projections using point estimates. Red shaded area is 95% confidence interval, colour saturation indicates estimated likelihood an income trajectory passes through a value. Photo by Burke M, Hsiang SM and Miguel E., Nature, 2015.

“All told, these estimates equate to much larger economic losses than most leading models suggest…,” Sterner writes. “ The current leading models, referred to as integrated assessment models (IAMs), are already being used as a basis for policy. In the United States, there have been considerable battles, even in Congress, concerning the ‘social cost of carbon’, which is based on the three most prominent IAMs.”
Burke’s study argues that Congress and other policy agencies have based their predictions on the social costs of global warming and carbon pollution on estimates that are off by several hundred percent.
“[This study] is part of a growing literature suggesting that climate change is more harmful than current models indicate,” Greenstone said.