Those who oppose policies to cut carbon pollution and slow climate change always claim that doing so will be too expensive and cripple the economy. They argue that instead we should maximize economic growth so that we can pay for climate damages and adaptation in the future. It’s an argument helped by the fact that models have essentially treated economic growth as an external factor that won’t be significantly impacted by climate change.
That assumption has been challenged in recent years, starting with a 2012 paper in the American Economic Journal finding that higher temperatures reduce economic growth rates, particularly in poorer countries. A 2015 paper by Stanford scientists published in Nature Climate Change built on this work, similarly finding that global warming will particularly hurt economic growth in poorer countries, and that “Optimal climate policy in this model stabilizes global temperature change below 2 degrees C.” This finding is consistent with the target set by the Paris climate accords.
Later in 2015, a team of scientists led by Marshall Burke published a paper in Nature finding a relationship between temperature and Gross Domestic Product, or GDP. There’s a sweet spot where regions with an average temperature around 13 degrees Celsius (55 degrees Fahrenheit) have the highest economic productivity. When temperatures are much hotter or colder, GDP falls. Countries like the United States, Japan, China, and many European countries happen to have temperatures right near that sweet spot, while many developing countries closer to the equator—in regions like Africa and southeast Asia—are already hotter than optimal. Consistent with the findings of the aforementioned studies, the economies of these poorer tropical countries will be particularly hard hit by global warming, because their climates are already sub-optimally hot.
Just recently, Burke led another team of scientists in research quantifying these economic costs of higher temperatures. Their latest paper, also published in Nature, found that limiting global warming to 1.5 degrees Celsius would likely save the global economy more than $20 trillion by the year 2100 as compared to 2 degrees Celsius warming—at a cost of about $300 billion. That means the benefits of curbing climate change would exceed the costs by about 70-to-1. The study also only accounts for temperature effects on GDP and not other damaging factors like sea level rise, and is thus likely a conservative estimate.
Burke’s study also estimated the economic impact of higher levels of global warming, if we fail to meet the Paris climate targets. For example, global warming of 3 degrees Celsius above pre-industrial temperatures in 2100 would reduce global GDP by about 10 percent as compared to 2 degrees Celsius global warming. A temperature of 4-to-5 degrees Celsius would make us 10 percent poorer yet, as compared to 3 degrees Celsius. Those would be massive economic losses that could exceed $100 trillion. And it wouldn’t just impact poor countries—a working paper recently published by the Federal Reserve Bank of Richmond found that global warming could significantly hamper economic growth in the United States as well, especially in the hotter Southern states. The paper found that if we meet the 2 degrees Celsius Paris climate target, US economic growth will only slow by about 5-to-10 percent, but global warming of 3-to-3.5 degrees Celsius would dampen the American economy by twice as much—10-to-20 percent.
It’s also worth noting that these are not controversial findings. Even economists and organizations most-cited by climate contrarians agree that further global warming will hurt the economy, and has been hurting the economies of poorer countries for about 40 years.
On the flip side of the coin, the costs of cutting carbon pollution depend on the efficiency of the policies and technologies we deploy. If we’re smart about it, we can cut carbon pollution relatively cheaply. For example, a study by Regional Economic Models, Inc. and Synapse Energy Economics, Inc. found that a steadily-rising carbon tax whose revenues were all returned equally to American households would grow the economy, with a net GDP increase of $1.3 trillion over 20 years. Among economists with expertise in climate, there’s also a 95 percent consensus that the US government should commit to cutting carbon pollution, with 81 percent favoring a market-based solution like a carbon tax. And the Intergovernmental Panel on Climate Change 2014 report found that meeting the Paris targets would only slow annual economic growth by 0.06 percent—in other words, rather than increasing by say 2.3 percent per year, global GDP would increase by 2.24 percent per year.
It will take an immense effort to meet the Paris targets, but not a terribly costly one, relatively speaking. In fact, the opposite is true—failing to curb climate change would cripple the global economy. That’s why the benefits of climate policies far outweigh their costs.