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.The only commentary I have seen about this so far is at The Atlantic Its key point is this:
Researchers from Stanford University found that the current price of climate change is more likely six times as much, approximately $220 for every ton of carbon produced. Using a new model to calculate the number, the researchers took into account the economic damage that catastrophic climate events, like storms or crop loss, could pose to a country’s GDP over time. “If climate change affects not only a country's economic output, but also its growth, then that has a permanent effect that accumulates over time,” Frances Moore, co-author and environmental scientist, said.But then they go on to note that many others think that the study might be too pessimistic.
The other point made in the Atlantic is that the study emphasises how poorer countries are estimated to do worse:
Another intriguing aspect of this new model, however, is that it also incorporates the economy’s ability to adapt to damage from climate changes and acknowledges that warming temperatures will economically affect high- and low-income countries differently. "There have been many studies that suggest rich and poor countries will fare very differently when dealing with future climate change effects, and we wanted to explore that," co-author Delavane Diaz said. The researchers noted that because poor countries are on average hotter than rich countries and have less rigid infrastructure, they might suffer greater economic costs due to climate change. “If temperature affects economic growth rates, society could face much larger climate damages than previously thought” Diaz said. “This would justify more stringent mitigation policy.”I'm guessing then the "do nothing because I hate taxes and government generally" crowd will say something like "see, this means we must make poor countries rich as fast as possible so they don't suffer as much as if we keep them poor. And that means - they should burn more fossil fuels!"
But the dog chasing its tail aspect of such an argument should be obvious, shouldn't it? How could you ever work out with confidence that they can grow wealth to a sufficient level fast enough to make the future adaptation to climate change adequate? (Short answer - you can't. They want the globe to take a gamble on their mere, ideological motivated, hunches.)
The study does have the benefit of bolstering the Pope's likely position (in a coming encyclical) that climate change is a matter of crucial social justice, and that therefore Catholics should indeed take it seriously.
But back to the big picture of this entire exercise. People who read me regularly will know that I am deeply skeptical of this whole economic forecasting on a scale out beyond (say) 20 or 30 years; especially so when the point is to try to factor in something about which the regional effects still remain rather uncertain. (It is easier to be confident about the "big picture" than the regional one in climate change.)
It seems that at least part of this article bolsters my skepticism. (Although they do continue to put enough faith in the whole dubious forecasting exercise to make one of their own.)
But I have another question: can any economist type who reads this tell me if there is anything equivalent that has ever been attempted in economics? And if so, was it successful?