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Temperature impacts on economic growth warrant stringent mitigation policy

An Erratum to this article was published on 25 February 2015

This article has been updated

Abstract

Integrated assessment models compare the costs of greenhouse gas mitigation with damages from climate change to evaluate the social welfare implications of climate policy proposals and inform optimal emissions reduction trajectories. However, these models have been criticized for lacking a strong empirical basis for their damage functions, which do little to alter assumptions of sustained gross domestic product (GDP) growth, even under extreme temperature scenarios1,2,3. We implement empirical estimates of temperature effects on GDP growth rates in the DICE model through two pathways, total factor productivity growth and capital depreciation4,5. This damage specification, even under optimistic adaptation assumptions, substantially slows GDP growth in poor regions but has more modest effects in rich countries. Optimal climate policy in this model stabilizes global temperature change below 2 °C by eliminating emissions in the near future and implies a social cost of carbon several times larger than previous estimates6. A sensitivity analysis shows that the magnitude of climate change impacts on economic growth, the rate of adaptation, and the dynamic interaction between damages and GDP are three critical uncertainties requiring further research. In particular, optimal mitigation rates are much lower if countries become less sensitive to climate change impacts as they develop, making this a major source of uncertainty and an important subject for future research.

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Figure 1: Per-capita GDP for rich and poor regions for the reference (no damages) run and DICE-2R and gro-DICE models under business-as-usual.
Figure 2: Results of Pareto optimal runs of DICE-2R and gro-DICE.
Figure 3: Results of Pareto optimal runs of gro-DICE, and versions of gro-DICE that include dynamic damage functions based on either the temperature or resilience mechanisms (Methods).
Figure 4: Sensitivity of three key indicators of twenty-first century climate policy to climate sensitivity, the pure rate of time preference (PRTP), the sensitivity of economic growth rates to temperature, adaptation rate, and the temperature or resilience mechanisms.

Change history

  • 28 January 2015

    In the version of this Letter originally published, in equation (1) and in the explanatory sentence following the equation, jTFP should have read rTFP. In the second line of the equation, jDJOj,t should have read rDJOj,t. These errors have been corrected in the online versions of the Letter.

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Acknowledgements

We would like to thank J. Koomey, C. Reichard and M. Craxton for comments on the manuscript. F.C.M. is supported by the Neukermans Family Foundation Stanford Interdisciplinary Graduate Fellowship.

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F.C.M. and D.B.D. designed the analysis. D.B.D. performed the analysis. F.C.M. and D.B.D. analysed results and wrote the paper.

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Correspondence to Frances C. Moore.

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Moore, F., Diaz, D. Temperature impacts on economic growth warrant stringent mitigation policy. Nature Clim Change 5, 127–131 (2015). https://doi.org/10.1038/nclimate2481

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