William Nordhaus, who would later win the Nobel Prize in Economics, introduced a “damage function”—an estimate of the damage caused by an additional unit of growth—in modeling the interaction between the economy and the atmosphere. temperature.
We knew very little about its value climate change unknown land calling it “terra incognita”, unstable land compared to “terra infirma”, the costs of preventing it. Finally, a rough estimate suggested that 1–2% of global GDP would be lost from a 3°C temperature increase. This, he wrote in 1991, was nothing more than “a sweeping hypothesis.”
A new case file adds to the damage. Diego Känzig of Northwestern University and Adrien Bilal of Harvard University use past changes in temperature caused by volcanic eruptions as well as El Niño, an annual increase in the temperature of the Pacific Ocean, to model the effects of a warmer planet. Economist.
Using long-term data on global economic growth and average annual temperature, they find that an additional 1°C rise in temperature would lead to a 12% drop in GDP. According to their calculations, a climate change scenario with a temperature increase of more than 3°C would be tantamount to waging permanent war.
Both temperature and economic growth are “non-stationary” and “autocorrelated” in terminology.
Imagine going home drunk. Heads in the right direction, but makes random missteps, sometimes going too far to the left, sometimes too far to the right.
At each point, his position will depend not only on the direction he is going, but also on all these stumbles.
Economic growth and temperature are similar: they go in the same direction (up), but each year their level will depend on previous deviations. Trying to find a relationship between the two will almost inevitably lead to the wrong conclusion.
How do we find the right answer?
The solution is to look at “temperature shocks” and see how they relate to the economy.
How slowly areas grow after a heat wave indicates the potential damage of climate change. Using short-term temperature fluctuations creates a new problem: adaptation.
If a county is experiencing a drought, it can buy food from another place. It cannot do this if the world as a whole is losing agricultural land.
Ms. Känzig and Bilal use the whole world as a panel. Although this approach solves the small area problem, it also suffers from new ones.
Historical variability in global temperatures, such as those caused by El Niño, has typically been small – about one-tenth of the two or three degrees of warming that climate change can bring.
Is everything really as scientists describe it? Of course, the methods have their drawbacks, but one thing is certain, climate change has far more severe costs than we first guessed.