Study warns economic impacts of climate change 'far larger' than previously thought

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The effects of climate change on economic growth may be "far larger and far more uncertain" than has been previously thought, a new study from the University of California, Davis has warned.

Published last week by IOP Publishing in the journal Environmental Research Letters,the study saw researchers from UC Davisused an empiric approach to assess the effect of rising global temperatures on GDP using lower frequency temperature variation.

They found that effects vary from country to country, but collectively, when using three different GDP datasets they found that there is evidence that temperature increases can impact economic growth, and not just economic productivity.

According to the research, in around 22 per cent of the nations examined, it was revealed that economies are vulnerable to long-lasting temperature shocks that can last for at least 10 years.

Researchers warned that this means that the aggregate effects of climate change on GDP may be much larger and uncertain than was previously thought.

The research was was funded by the National Science Foundation and the European Union's Marie Sklodowska-Curie Actions program and led by lead author and PhD candidate Bernardo Bastien-Olvera. He warned that many countries are likely already dealing with chronic temperature consequences.

"Our results suggest that many countries are likely experiencing persistent temperature effects," he said. "This contrasts with models that calculate metrics like the social cost of carbon, which mostly assume temporary temperature impacts on GDP. Our research adds to the evidence suggesting that impacts are far more uncertain and potentially larger than previously thought."

Previous research which has examined the effect of climate change on the economy has done so by questioning the delayed effect of temperature on GDP in subsequent years, but according to UC Davis scientists, these results were inconclusive.

To conduct the new study, UC Davis scientists and co-authors from the European Institute on Economics and the Environment in Italy used a novel method to isolate the persistent temperature effects on the economy by analysing lower modes of oscillation of the climate system.  

As an example, the scientists highlighted the economic impact of the El Niño Southern Oscillation, a three to seven-year temperature fluctuation in the Pacific Ocean that affects temperature and rainfall in many parts of the world.

"By looking at the GDP effects of these types of lower-frequency oscillations, we're able to distinguish whether countries are experiencing temporary or persistent and cumulative effects," Bastien-Olvera said.  

The team said they used a mathematical procedure called filtering to remove higher frequency yearly changes in temperature. 

Despite the progress that they made with this approach, the scientists acknowledged that characterising temperature impacts on the economy is an "enormous" task, which they admitted is not likely to be comprehensively answered by a single research group.

"Data availability and the current magnitude of climate impacts limit what can be done globally at the country level," said co-author Frances Moore, an assistant professor of environmental science and policy and UC Davis and the study's principal investigator, "However, our research constitutes a new piece of evidence in this puzzle and provides a novel tool to answer this still unresolved question."  

But despite the inherent uncertainties contained in any economic modelling, some economists will hope the research will add to a growing body of work that is attempting to provide a corrective to influential studies that have controversially assumed that historic rates of global economic growth will continue even as climate impacts escalate.

Such studies have argued that climate impacts may curb future growth, but will only knock a few percentage points off future GDP as societies continue to get richer. They have maintained that as such relatively modest carbon prices and climate policies should allow the world to decarbonise while avoiding the worst impacts of climate change.

But critics have countered that the breadth and scale of climate impacts such as disruption to food security, infrastructure damage, and increased migration could have a huge dampening effect on future economic growth.