A pair of researchers has published a new paper claiming that global warming is astronomically more dangerous than we've thought until now. Their thesis is simple: historical evidence shows a very strong correlation between average global temps and extreme weather events, and those extreme weather events are very costly.
Interestingly, they do something I haven't seen before. Instead of just projecting what will happen in the future, they go backward and look at the past:
Our results also indicate that world GDP per capita would be 37% higher today had no warming occurred between 1960 and 2019 instead of the 0.75°C observed increase in global mean temperature.
World GDP is currently around $100 trillion, so the authors are saying that it would be $37 trillion higher in the absence of climate change. This is presumably the price we're paying for more extreme weather events.
I'm having some trouble with this. Even if you just add up all the weather events in a year and attribute every single one of them to climate change, does anyone think they currently cost us $37 trillion?
Let's take a look around. Insurance broker Gallagher Re estimates that the total cost of all weather disasters was $360 billion in 2022 and $301 billion in 2023. The European Environmental Agency estimates about $50 billion for Europe in 2022. The World Meteorological Association estimates roughly $200 billion in 2019 and $4.3 trillion over the past 50 years.
That's enough to give us a pretty good idea of the shape of things. If extreme weather events cause around $200-300 billion in direct damages and, let's say, half of that is due to climate change, they would need to account for 100-200 times as much in indirect economic impact to hit $37 trillion in lost GDP.
So I dunno. Maybe I'm missing some crucial point. But these numbers don't seem very plausible.
The authors spent 60 pages on the methodology, so it is all there to be assessed. There are plenty of integrals for those who like those things.
Having not read it, I wouldn't think that insurance would bare hardly any cost of the cost of climate change. I would think that the cost of mass migration and re-locating farms, because crops will no-longer grow, would be the dominant piece. Additionally, this is world growth, so maybe the authors are concluding that in the absence of climate change, the poorer nations of the world would have grown much more, so looking only at the US and Europe is not at all sufficient.
I think, however, you are mainly missing the point. I don't know about this paper or any specific paper, but there is a growing body of literature pointing to a very high social cost of carbon. This has enormous policy implications for decolonization efforts. The true cost of a gallon of gas or a lump of coal is much much higher than we pay today.
I was going to post asimilar comment to yours. The key point is that climate change costs are not primarily due to extreme events but to constant change that reduce investment in longterm growth.
One more in agreement here, it's pretty obvious that while hurricanes and heat waves are the headline-generating events, that there are a million tiny things contributing to economic costs that go under the radar, and I'm a little surprised Mr. Drum didn't extend his imagination that far.
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Please go away, Trunt.
I doubt any insurance company paid out a nickel for an entire ski season in the Alps wiped out. And that’s just a tiny fraction of what is occurring all the time.
I think you meant decarbonization efforts, not decolonization efforts?
Yes. Spell check. Thank you.
73 pages, 20,000 words
I scanned it and there was a lot about "shocks" but little (or nothing) about what you describe above: relocation of people and activities. Also, there might be a decrease in agricultural productivity (world average) and costly infrastructure effects (e.g. water supply) which I didn't see addressed as such.
The paper may have merit, but it was way too macro-economic-y for me. I suppose that's necessary to evaluate lost GDP, but I would have appreciated a little more direct-result-of-temperature scenarios in the mix.
Not all natural disasters get recorded as "natural disasters". For example, many diplomats believe that the Syrian Civil War of 2014 was caused by drought. Millions of farmers couldn't make a living, and that started the unrest.
Question: Will doing a better job of addressing the climate change crisis have a significant and measurable positive long term impact?
Answer: Yes.
Question: Is it possible to predict with some degree of precision what that positive long term impact will be?
Answer: Yes, but isn't that just bikeshedding?
Ref: https://en.wikipedia.org/wiki/Law_of_triviality
I dont think that insurance claims capture very much of the potential long term reduction to growth and output. Not sure that really even makes sense to use as an estimate.
Exactly. The opportunity costs involved in merely rebuilding and replacing deprive investment in growth.
Agreed! Imagine trying to save for retirement if you had to buy a new car twice as often, and on an emergency basis. Compared to a person's lifetime income, the money spent on replacement cars wouldn't be that enormous, but it would be a significant fraction of your potential investment, and hence, over time, would leave you much, much poorer.
Yes. Places that get hit by disasters suffer long-term damage well beyond the initial price tag. I noticed a long time ago that the largest city or town on each Caribbean island is usually on the north or west side - because hurricanes approach from the southeast, and every time a place gets demolished by a hurricane, lots of people move away to undamaged areas. Over time, hurricanes act as a "broom" sweeping population and economic activity away from more vulnerable locations towards less vulnerable ones.
On the US Gulf Coast, major cities tend not to be directly on the coast for the same reason, even though being directly on the coast would be better for trade. So the whole Gulf Coast has lower GDP than it would have if it wasn't regularly hit by hurricanes. Observe how New Orleans was permanently damaged by Hurricane Katrina, and how Galveston faded from prominence after the 1900 hurricane.
this
there are also health costs
impacts on productivity
rising operational costs
infrastructure impacts without a storm (just ask Miami about sunny day tidal flooding)
and on and on
I don't know if $37T is right or not, but leave it to Drum to just focus on the reinsurers and bad storms as the only cost that could possibly happen
GDP is a poor measure for the impact of extreme weather events due to Global Warming. For one, the effort to repair the destruction caused by extreme weather events only adds to the GDP.
This seems wrong. If a storm causes $4 billion in damage, and over the next, say, five years, the economy in question creates $4 billion in outputs that go toward repair and rebuilding, we in fact need to count that second $4 billion. There's no "unjustified" GDP that is being counted (but shouldn't be) because measured output will stiff suffer. And that's because some of the original $4 billion in damage will have been done to productive assets (factories, offices, infrastructure, etc), and the output of these assets will no longer be counted (because it no longer exists, at least temporarily). That output, in other words, is lost forever.
In fact plenty of measured GDP outputs are created to replace distressed, depreciated, damaged assets. A company that produces, say, factory machinery, shouldn't have its output discounted in GDP calculations merely because some of its products are intended to replace worn out machines.
GDP is the value of all production; the production needed to replace things that no longer work or need replacing has a value attached to it just like anything else the economy produces.
It is discounted towards growth, though, if its machines wear out sooner.
I didn't mean that the repair efforts shouldn't be counted in the GDP, but that repair efforts (and mitigation efforts) resulting from Global Warming stimulate the economy and can lead to increased GDP. This is similar to wars stimulating the economy and increasing the GDP.
Wars only stimulate the economy if you build/rebuild more than you lose.
In the US we often think of war as a positive effect because it creates lots of debt fueled investment and employment...and most importantly, all the damage and loss is happening somewhere else.
Climate related losses and repairs are not similar in either way.
We also dont attempt to measure what the war boom might have looked like if we had invested in something else and not destroyed all those productive people and buildings in that other place. The war boom might disappear quickly if we measured these key variables.
If a storm causes $4 Billion in damage, let's say it destroyed $4 Billion in infrastructure. That's one of the problems with GDP as it is currently measured, that $4 Billion loss never shows up. Spending $4 Billion to replace the infrastructure does count. The loss of that infrastructure means former users of that now-destroyed infrastructure have added costs. For example, anyone who used to use the Francis Scott Key bridge in Baltimore now has a longer commute. More fuel used (so that's a net positive for GDP, as producing that fuel is economic activity that counts). More time spent (that doesn't show up in the bookkeeping). Other activities, ones that had the potential to add further investment and produce further cost savings, get deferred, because the time or capital has been spent somewhere else. Again, real losses that don't show up in the GDP account.
Offhand I'd think it would have a lot to do with the period they assessed. An increase in growth of just 1.5% per year would yield a 35% increase over 20 years, and likewise 2% for 15 years or 2.5% for 12 or 3% for 10.
Per my horseback estimate, an extra half point of annual average global growth would roughly do the rick of reducing GDP by 37%. Actual growth since the early 1960s has averaged 3.5% per the World Bank. So in essence this paper is claiming (I think...but I haven't read it) that we'd have seen 4% instead of 3.5% all these years without climate change. That sounds very, very high to me, but I'm not an economist and I haven't read the paper. So, who knows?
I had just done a similar calculation.
Assume "climate cost" of 0.5% of annual global GDP growth.
Assume annual global GDP growth of 3.5% (w/o climate cost).
Calculate cost for 64 years (1960-2024).
1960 = 100
Growth of 100 at 3.5% (no climate cost) for 64 years = 904
Growth of 100 at 3.0% (w/ climate cost) for 64 years = 663
Difference in end value (2024) = 241
"Climate cost" of 241 in lost value = 36.3%
I haven't looked at the 40 pages of explanation, but the headline number for "climate cost" seems highly reasonable to me.
The key point is that growth is compounded growth. Same with costs. You don't just lose the nominal cost, you lose the compounded cost.
This is a good point!
We should definitely look to the past to understand the impact of climate:
https://www.mattball.org/2023/08/the-horror-of-climate-change.html
Wouldn’t there also be the opportunity cost? $1 million spent repairing stuff could’ve been invested in something else that provides additional revenues.
But these numbers don't seem very plausible.
Agreed. We'll see where we are in six months after the economics profession has had a while to peer-review the study.
Would we even have a GDP if global warming hadn't occurred?
Good point! Up until the advent of the internal combustion engine, humanity produced exactly zero goods and services! Century after century, for thousands of years, billions of human lifetimes with null economic output. It's astonishing that we lasted long enough to start burning fossil fuels.
We would have a global economy worth trillions without industrialization?
No, but we did have a GDP; you were asking if we would "even have a GDP if global warming hadn't occurred." The answer, as banal as it may be, is of course we would.
FWIW, I am hopefuly/reasonably confident that we will have a global economy worth trillions of dollars that also has a closed carbon cycle.
This seems like bait, please feel free to correct me if I'm wrong about your seemingly trollish intentions.
"Even if you just add up all the weather events in a year and attribute every single one of them to climate change, does anyone think they currently cost us $37 trillion?"
You're taking the cost of repairing to get back to pre-disaster status quo (nominally anyway), which is an apple to the orange of the authors' statement that GDP would be higher by that amount. That apple is a one-time expense for a new HVAC whereas they're saying our salaries would be 37% higher if we hadn't had to spend all that time and money dealing with getting a new HVAC.
There are two kinds of extremely complex calculations going on here - economic and climate. Nobody has enough knowledge of either of these two things to make quantitative or even semi-quantitative predictions. When have quantitative economic predictions for more than a year or so ever been better than random?
We know that it's going to get warmer and there are certain predictions that follow from that, such as rising sea level and more flooding, but there is just not enough empirical knowledge of weather and climate patterns to know how this will affect most areas of the earth with respect to economic development. How do researchers know how economies will react to changing local climate? If some areas become less favorable, others will become more favorable. We can predict that there will have to be population redistributions, but that has been a constant in all of human history. And at times climate change has influenced migration.
Migration has usually involved conflict. The consequences of this may be more important economically and in terms of lives than any effects on current peacetime economies (where these exist). This should be a major worry, but is not quantifiable.
"How do researchers know how economies will react to changing local climate? If some areas become less favorable, others will become more favorable."
Indeed! How is anything really, truly, knowable, after all? It could well be that maybe being able to grow rye in parts of Greenland (pop. 57k) will prove to be an economic windfall more than outweighing the drowning of Bangladesh (pop. 171 million) and the trillions of dollars in coastal city infrastructure globally. People will just "migrate," which as we all know, is a costless activity that, even if it maybe did cost something, is just "not quantifiable" so people shouldn't even try.
+1
Yes, you are absolutely right, very complex and uncertain modeling is involved. But you know when you are talking about risks to hugely valuable and taken-for-granted eco-system services and possibly extreme disruptions to global organization, uncertainty is not your friend.
I would also like to push back on the common flip and polyannish notion about just migrating everything and everyone. Farming is about more than the right climate, it is also about soil, and arable land generally takes thousands or 10s of thousands of years to develope. We will not be able to simple plant all our wheat crops on Greenland's newly thawed terrain.
If global warming boosted GDP, I'd still be against it because of the drawbacks for the natural world, for human happiness and for the future. But I get the point of such studies. Environmentalists are like soccer players asked to prove they can win at rugby, too. The problem is that when they do, no-one pays attention.
I'll ask Drums question another way
How dangerous is the unknown?
Having survived a number of hurricanes here in Wilmington (coastal) North Carolina I can say this. For every dollar spent by insurance companies to fix weather related damages there's much more spent by individuals fixing the same weather related damages
They don't want to file a claim because it would just make their insurance rates go much higher!!!
This is hard to quantify if not impossible. It requires that ALL damages be reported and all damages be tracked - neither of which happens.
And outside the U.S. and Europe I'm sure insurance levels are generally much lower to non-existent. So for much of the world, insurance claims would capture only a small fraction of the loss. I believe, for example, that in Iran and other Islamic countries, insurance is still discouraged by religious authorities since it is seen as an attempt to thwart the will of God,
Great discussion in this thread. But I think it's worth stepping back to look at a bigger (global?) picture. In our popular media universe, climate is perceived as a touchy-feely "progressive" issue for environmentalists and animal lovers. On the other hand, economic growth is perceived as a hard-nosed "conservative" issue for business owners and real men with pickup trucks.
Consequently, doing something about climate change is widely perceived as being in *opposition* to a strong economy. You see this in polling where we regularly hear about how the public prioritizes *the economy* far above *climate and the environment*.
This is the problem! Climate change *is* a drain on the economy. This simple fact just hasn't penetrated our national consciousness.
The precise number of trillions is not as important as the fact that climate change (and therefore fossil fuel emissions) is significantly harming the economy. That's why there is a "social cost of carbon" -- an unfortunate choice of words because it should really be the "economic cost of carbon."
This is one of the main achievements of the Republican party (in service of its clients, oil companies and other large corporations).
And it's a stupidly *recent* achievement, too. George W. Bush included cap-and-trade climate legislation in his party platform when he ran for president, for example (as another example, there is that ad that Pelosi and Gingrich of all people cut, urging bipartisan action on climate change).
True, it's unclear how much that sort of thing was in good faith, but the Republicans have moved a lot in the wrong direction in a very short time on climate change.
Except the global cyclone data does NOT indicate that there's been an overall increase in the number of tropical cyclones globally, nor in the number of major cyclones, nor in the energy they've released. Dr Ryan Maue does a great job graphing the data here...
https://climatlas.com/tropical/
And in the US, the yearly counts of tornadoes EF-1 and higher have been trending downward since the 1950s — except we had a big spike last year.
That's not all of world storms, tho.
Nor is it all tropical storms.
Nor is it all rainfall or wind damage by squall lines.
Why do you think this is persuasive? It's like saying, 'all children over 6 feet in height didn't increase in number or basketball output, therefore we didn't have more children playing basketball.'
It's nonsensical as an argument.
No, it's all the world's tropical cyclones with winds greater than 64 knots. Maybe all the surface ocean heat energy *is* increasingly being expended in sub-64 knot squalls, but this would be a *good* thing because those sorts of storms don't do much damage. But as an apples-to-apples comparison over time these are useful graphs because the overall sizes and numbers of tropical cyclones has not been increasing—despite claims we see in the popular media.
Two words: compiund interest..
If GDP growth was reduced by 0.5% each year between 1961 and today, how much lower would GDP be today? About 37%?
About 17%.
Consensus seems to be they compounded the effect of the years. Though they have the social cost of carbon at 31% and effect on GDP at 37%--not sure why that difference.
For sake of simplicity, let's assume humans are commodities that can be assigned a cost/loss -- eg lose 1 human you lose $1M.
Now, account for inflation. How much did you "lose" after one year of 5% inflation?
That's how to think about Bluto_Blutarski's comment above.
This isn't exactly how the paper tackles the issue, but think of it as a wider picture summary of the loss of GDP %.
I was thinking along a similar line, but with refugee populations.
When Clinton ran, there were 65million refugees in the world. Last time I looked for data (last election) we were up to 100million.
That growing refugee population -- people driven from their homelands -- has got to be an indicator of the growing cost of climate change.
Immediate costs of climate change are now showing up. Mainly in insurance rates, especially in hurricane or fire or flood prone areas--e.g FL and CA.
May not have huge effect on GDP, but certainly hurts individuals. Referring to the US. Droughts and famine and floods in other parts of the world are getting worse too.
I don't know how the paper estimates their GDP cost. but I can think of a lot of factors other than the direct consequences of extreme weather events which would impact GDP:
In many places in the world (including in the US) people started migrating from areas most at risk. Some areas where people used to live from farming are becoming not viable anymore, so people move to cities (increasing homelessness, poverty and criminality) or try to emigrate to wealthier countries (increase in illegal immigration, smugglers, criminality, a lot of resources spent on protecting borders in Europe). There are conflicts related to access to water or good land, and these are increasingly violent as the resources becomes scarce. Violence increases, countries and organizations spend more and more money on defense and security, military spendings increase at the expense of education, health, etc.
The cost of climate change is a lot more than only extreme weather, if only because it's already forcing a lot of people (even countries) into survival mode.
Exactly, but put it in terms for Americans to understand....coffee and chocolate prices are going to go through the roof.
Answer: Extremely dangerous.
But not so much to people the age of Kevin or me because although we've got one foot on a banana peel and the other on a bar of soap we own our homes and have reliable income. It's the people, say, 40 and under - especially the ones with kids - that are in the crosshairs.
Destabilize the weather and you interfere with food production. Reduce food availability and you get wars over what's left, which is ironic because blowing shit up (like in Ukraine and Gaza) is absolutely the stupidest possible activity when CO2 is rising and food production is getting chancy.
(I know this is a silly program, but if you watch season 3 of Clarkson's Farm you get a feel for just how easy it is to get a crap yield due to unreliable weather even when you've got all the best equipment and a TV dilettante and crew are bankrolling the operation).
If the sole impact of climate change was to slow the growth of global GDP, I might even regard it as a positive development. Global warming has to some extent distracted people from all the other threats posed by relentless "economic growth". Unfortunately the danger of climate change lies not only in its threats to human health and habitat, but in the way it is exacerbating other slow-moving disasters from massive extinction of species to the acidification of the oceans.
Nearly half of the world's population currently lives in poverty, defined as income of less than $2 per day, including one billion children. Of those living in poverty, over 800 million people live in extreme poverty, surviving on less than $1.25 a day. If you were one of these people, you'd surely hope for faster GDP growth.
Also, regarding economic growth and pressure on the environment, a top pressure is population growth. The faster lower income countries become middle income countries, the sooner their population growth rates will decline.
"... a top pressure is population growth."
The WSJ have just put up an article saying that "The whole worlld is alarmed" because of birthrate fall.
These people are first class idiots.
(I don't read WSJ, I just saw a reference to it somewhere)
https://www.wsj.com/world/birthrates-global-decline-cause-ddaf8be2
There are a lot of ways to lose GDP that don't involve disasters. If you're only counting hurricanes, you're missing a lot. Like crop failures. Desertification. Loss of habitat.
Indeed. Think of the economic hit that we took (in productivity, public health, etc.) during last summer's wildfires that turned the skies of major cities into nightmare haze miasmas. And now think of that happening every year (because it basically almost does at this point).
If you want to outline the risks of climate change, and specifically dangers, lower GDP is about the least of your concerns, though obviously still a concern with real-world political impacts which could make the problem worse.
None of this is easy, and it's fair to ask if humanity is capable enough to pass this test, and if not whether massive disruption and destruction inevitably lay ahead, with our only hope being we don't hit a runaway tipping point that ends life and humankind as we know it.
One thing I know for sure is Republicans, conservatives and right wing actors will never accept the science if it gets in the way of power and the almighty dollar (until it's way too late), and fundamentalist Christians won't end up caring about current life or upcoming generations either, and instead will take comfort that life and humankind will survive in heaven (or at least themselves and their family).
Selfishness is the engine that runs this world, and that will likely end this world, but I haven't given up hope yet, we've still got a few tricks up our sleeves, and younger people coming up will likely have some novel ideas and approaches as well.
I wish there was a way to like this post but this site is not set up for this. Most of the posters on this thread are focused on GDP and growth and profit, but this is obviously (to me) not the salient point. Who cares what the margins are or how debt gets amortized when starving people are fighting for food.