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A top-down approach to projecting market impacts of climate change

Nature Climate Change volume 6, pages 51–55 (2016)Cite this article

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Abstract

To evaluate policies to reduce greenhouse-gas emissions, economic models require estimates of how future climate change will affect well-being. So far, nearly all estimates of the economic impacts of future warming have been developed by combining estimates of impacts in individual sectors of the economy1,2. Recent work has used variation in warming over time and space to produce top-down estimates of how past climate and weather shocks have affected economic output3,4,5. Here we propose a statistical framework for converting these top-down estimates of past economic costs of regional warming into projections of the economic cost of future global warming. Combining the latest physical climate models, socioeconomic projections, and economic estimates of past impacts, we find that future warming could raise the expected rate of economic growth in richer countries, reduce the expected rate of economic growth in poorer countries, and increase the variability of growth by increasing the climate’s variability. This study suggests we should rethink the focus on global impacts and the use of deterministic frameworks for modelling impacts and policy.

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Figure 1: Schematic of methodology for calculating regional impacts of climate change.
Figure 2: Effects of climate on economic growth through changing averages and changing variability.
Figure 3: Distribution of change in growth rate as a function of inequality aversion (η).

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Acknowledgements

D.L. is grateful for support from Resources for the Future’s John V. Krutilla Research Stipend and the University of Arizona’s Institute of the Environment. S.K.’s research was supported by the National Science Foundation under award No. 1331373. The Dissertations Initiative for the Advancement of Climate Change Research (DISCCRS) played a crucial role in connecting the authors and stimulating the project. G. Moreno and C. Raphael provided research and graphical design assistance, respectively.

Author information

Authors and Affiliations

  1. Department of Economics, McClelland 401, University of Arizona, 1130 E. Helen Street, Tucson, Arizona 85721, USA

    Derek Lemoine

  2. Geophysical Fluid Dynamics Laboratory, National Oceanic and Atmospheric Administration, Princeton, New Jersey 08540, USA

    Sarah Kapnick

Authors
  1. Derek Lemoine
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  2. Sarah Kapnick
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Contributions

D.L. led the experimental design and writing of the manuscript. S.K. provided GFDL climate model data and contributed to the writing of the manuscript. Both authors helped to interpret the results.

Corresponding author

Correspondence to Derek Lemoine.

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The authors declare no competing financial interests.

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Lemoine, D., Kapnick, S. A top-down approach to projecting market impacts of climate change. Nature Clim Change 6, 51–55 (2016). https://doi.org/10.1038/nclimate2759

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