Meanwhile, in the realm of actual legitimate concerns. (credit: IPCC)
Climate change may have many economic impacts, including loss of crops, changes in water supply, increased incidence of natural disaster, and spikes in health care costs related to infectious diseases and temperature related illness. However, hard evidence about the effects of climate change on economic activity has been inconsistent.
A new paper published in Nature takes on the ambitious task of connecting micro and macro level estimates of climate costs. The study finds that climate change can be expected to reshape the global economy by reducing average global incomes roughly 23 percent by the year 2100. This study is important because it solves a problem that has existed in prior models of climate change effects on economics: discrepancies between macro and micro level observations. This study presents the first evidence that economic activity in all regions is coupled in some way to global climate. The study also sets up a new empirical paradigm for modeling economic loss in response to climate change.
The study uses data from the years 1960 to 2010 to analyze what’s clearly a complex relationship between temperature and economic productivity. The authors’ analysis uses a novel approach to dealing with confounding variables, which allowed them to account for four important factors: (1) constant differences between countries, such as cultural differences, (2) common contemporaneous shocks, such as global price changes, (3) country-specific trends in growth rates, and (4) non-linear effects of annual average temperature and rainfall.
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