New academic research on the economics of climate change

Where will the winners from climate change be?

In the latest edition of the  Journal of Economic Perspectives (gated version here) Professor Richard Tol, Professor of the Economics of Climate Change at Vrije Universiteit, Amsterdam has an important survey article on the published output so far on the economic effects of climate change. I was very surprised to learn only 14 global estimates of the likely economic effects of climate change have appeared in the academic literature. Given climate change is by definition a global phenomenon, and there is significant (if fatally flawed and largely ineffectual) effort going into global response to climate change via Kyoto and the upcoming Copenhagen meeting, I had previously assumed there were large numbers of peer reviewed studies on the global economic impacts of climate change.

As Professor Tol notes:

“Only 14 estimates of the total damage cost of climate change have been published, a research effort that is in sharp contrast to the urgency of the public debate and the proposed expenditure on greenhouse gas emission reduction. These estimates show that climate change initially improves economic welfare. However, these benefits are sunk. Impacts would be predominantly negative later in the century. Global average impacts would be comparable to the welfare loss of a few percent of income, but substantially higher in poor countries. Still, the impact of climate change over a century is comparable to economic growth over a few years.”

From the work that has been done, the impact of climate change, across the whole planet, “is comparable to economic growth over a few years.” Two days ago, the UN revised down its global growth forecast for this year to -2.6 percent so in one year we are experiencing about a third of the entire predicted impact of a century of climate change. The GFC is bad but it certainly doesn’t seem nearly as bad as the catastrophic predictions from climate change regularly appearing in the media. Or to put it another way, if we could all just avoid another GFC for the next century that will ameliorate 1/3 of the claimed affects of climate change.

Another really fascinating part of Prfessor Tol’s paper is his observation that all studies published since 1995 show regions with gains and regions with losses. Some show overall gains at low increases in temperature as well. Winners appear to be Western and Eastern Europe while the losers are Africa and some parts of Asia (although not China apparently).

I’ve always wondered why all the effects of climate change are supposed to be negative. At the very least that seemed to assume a complete lack of adaptability but also as someone who lives in a temperate climate and sees the lush vegetation and speed of plant growth in warmer climes I wondered whether being a bit warmer where I live wouldn’t be a good thing?

Completely apart from whether the climate models are accurate in predicting global warming, and separate to the argument that Australia is only less than 2 percent of global emissions so can’t actually affect the climate outcome by acting alone, there seems this other problem that we aren’t discussing why don’t we just adapt? Surely we should understand our (and the planet’s) capacity to adapt our economy (and society) as an alternative to concluding the only solution to climate change is to reduce CO2 emissions?

Hat tip to Pedro Albuquerque who reckons all this is another example that “the debate on the subject until now has been mostly driven by dogma and not by science.”