Must-Read: Kathleen Maclay: Climate Change Will Reshape Global Economy

How climate change will affect world economies

Must-Read: Kathleen Maclay: Climate Change Will Reshape Global Economy: “Unmitigated climate change is likely to reduce the income of an average person on Earth by roughly 23 percent in 2100…

…according to [Solomon Hsiang, Marshall Burke, and Edward Miguel]… in the journal Nature…. Climate change will widen global inequality, perhaps dramatically, because warming is good for cold countries, which tend to be richer, and more harmful for hot countries, which tend to be poorer. In the researchers’ benchmark estimate, climate change will reduce average income in the poorest 40 percent of countries by 75 percent in 2100, while the richest 20 percent may experience slight gains…. The Nature paper focuses on effects of climate change via temperature, and does not include impacts via other consequences of climate change such as hurricanes or sea level rise….

They find climate change is likely to have global costs generally 2.5-100 times larger than predicted by current leading models…. In less optimistic scenarios, the authors estimate that 43 percent of countries are likely to be poorer in 2100 than today due to climate change, despite incorporating standard projections of technological progress and other advances. ‘Differences in the projected impact of warming are mainly a function of countries’ baseline temperatures, since warming raises productivity in cool countries,’ the researchers write in Nature. ‘In particular, Europe could benefit from increased average temperatures.’… ‘Introducing climate change to the global economy is like encountering a headwind when flying across the country,’ said Hsiang. ‘You might never feel it, but it can slow you down dramatically.’…

Humans exhibit optimal productivity in a specific band of temperatures… approximately 13 degrees Celsius or 55 Fahrenheit…. ‘Everybody knows that when they’re hot, it’s really challenging to focus, work and be productive,’ said Miguel. ‘When a few hundred million people are feeling that way, it’s the exact same thing, times a few hundred million. The whole economy is likely to slow down.’… The authors find that the global economy’s sensitivity to temperature has not changed appreciably in more than 50 years, in rich as well as poor countries… [suggesteing] adaptation to hot temperatures appears much harder than many had previously thought…

Jason Kottke: How Climate Change Will Affect World Economies: “Countries in the Northern Hemisphere with cooler climates stand to benefit…

…while the rest of the world will not. Here are some of the projected big winners (the Nordic countries) and losers (the Middle East): Mongolia +1413%, Finland +516%, Iceland +513%, Russia +419%, Estonia +259%; Saudi Arabia -96%, Kuwait -96%, Oman -94%, United Arab Emirates -94%, Iraq -93%. Canada (+247%) is another one of the potential big winners while the US (-36%) stands to lose out… along with all of Africa, South America, India, and China. This quote by one of the study’s lead authors, really grabbed me by the throat:

What climate change is doing is basically devaluing all the real estate south of the United States and making the whole planet less productive. Climate change is essentially a massive transfer of value from the hot parts of the world to the cooler parts of the world. This is like taking from the poor and giving to the rich….

Rich, predominantly white countries caused the problem and can do the most to limit the damage, but climate change will disproportionately affect poor countries, poor people (even in rich countries), women, and people of color. The rich need to do something about it so that the poor will not suffer. The problem is, the world’s wealthy have a long history of not being incentivized to help anyone but themselves. I hope this will turn out differently…or, as sometimes happens, the desires of the wealthy and the needs of the poor dovetail into action of joint benefit.

October 27, 2015


Brad DeLong
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