Guest Essay by Eric Worrall
”… While I am not an economist, in my opinion the data seems flawed. …”
New Study: Climate Change Could Reduce The World Economy 19% By 2049
Jon McGowan
Contributor
I am an attorney who writes about ESG policy, laws, and regulations.
A new study claims that loss of productivity because of climate change could result in a 19% reduction in the world economy by 2049. Despite the number being significantly higher than previous studies, the authors claim their numbers are conservative and could be as high 29% of the global GDP. Climate activists were quick to latch onto the study, calling for more aggressive measures to prevent climate change and fund mitigation efforts.
The study, The economic commitment of climate change, was published in Nature on April 17 by researchers at the Potsdam Institute for Climate Impact Research, also known as PIK, a non-profit organization funded by the German government.
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While I am not an economist, in my opinion the data seems flawed. According to a study published by NOAA in January 2024, the average temperature has risen 2° F since 1850. In that same period, the global GDP increased from $1.73 trillion to $134.08 trillion. If we accept the climate projection models used in the study, it dismisses the resiliency of human nature and our ability to overcome economic challenges.
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The abstract of the study;
The economic commitment of climate change
Maximilian Kotz, Anders Levermann & Leonie Wenz
Abstract
Global projections of macroeconomic climate-change damages typically consider impacts from average annual and national temperatures over long time horizons1,2,3,4,5,6. Here we use recent empirical findings from more than 1,600 regions worldwide over the past 40 years to project sub-national damages from temperature and precipitation, including daily variability and extremes7,8. Using an empirical approach that provides a robust lower bound on the persistence of impacts on economic growth, we find that the world economy is committed to an income reduction of 19% within the next 26 years independent of future emission choices (relative to a baseline without climate impacts, likely range of 11–29% accounting for physical climate and empirical uncertainty). These damages already outweigh the mitigation costs required to limit global warming to 2 °C by sixfold over this near-term time frame and thereafter diverge strongly dependent on emission choices. Committed damages arise predominantly through changes in average temperature, but accounting for further climatic components raises estimates by approximately 50% and leads to stronger regional heterogeneity. Committed losses are projected for all regions except those at very high latitudes, at which reductions in temperature variability bring benefits. The largest losses are committed at lower latitudes in regions with lower cumulative historical emissions and lower present-day income.
Read more: https://www.nature.com/articles/s41586-024-07219-0
Spot on Jon McGowan – it’s near impossible to produce a scary projection without making some pretty questionable assumptions. From the study above;
… Following a well-developed literature2,3,19, these projections do not aim to provide a prediction of future economic growth. Instead, they are a projection of the exogenous impact of future climate conditions on the economy relative to the baselines specified by socio-economic projections, based on the plausibly causal relationships inferred by the empirical models and assuming ceteris paribus. Other exogenous factors relevant for the prediction of economic output are purposefully assumed constant. …
Read more: https://www.nature.com/articles/s41586-024-07219-0
Holding as many variables as possible static, while changing only those variables you want to study, is a time honoured method of analysing complex systems.
But as the authors admit, their study is not realistic. My understanding of the study is they are attempting to abstract the impact say more extreme weather would have on the economy, if nobody attempted to mitigate these problems, say by building better drainage and water management systems to manage floods, and bigger reservoirs to maintain agricultural output during severe droughts.
As Forbes author Jon McGowan rightly points out, there are good reasons to doubt the real world applicability of the predictions of the study, even if we pretend their admittedly unrealistic assumptions are realistic.
Why would the next 0.5C of warming be so much worse than the previous 0.5C of warming?
There is no historical evidence which suggests the next 0.5C of warming, if it occurs, would be any worse than what we have already experienced. There is no evidence extreme weather is getting worse, despite the predictions of climate models which were used as the basis of the study quoted above.
In fact there are good reasons to believe additional warming might produce a better climate for humans.
Global warming is not evenly distributed across the world. Polar amplification is the observed strong tendency for global warming to be pushed away from the equator to where it is actually needed.
If global warming continues, by 2049 there is a very good chance there will be more viable agricultural land available for our use, not less. Canadian Geographic admitted in 2020 that global warming is opening millions of square kilometres of new agricultural land, and will continue to do so if the world continues to warm.
I’m personally pleased Jon McGowan and Forbes published this rare criticism of alarmist global warming tropes. Let’s hope more news outlets and authors find the courage in future to question the steady stream of increasingly exaggerated and implausible claims of how doomed we all are.
