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article imageEconomic damages from climate change have been underestimated

By Karen Graham     Aug 15, 2018 in Science
Melbourne - Economists have largely underestimated the economic damages from ignoring climate change and pursuing a "business-as-usual" course of action. However, economic modeling gives us a clearer picture of what we can expect if we ignore climate change.
New economic modeling shows a US$23 trillion loss in global Gross Domestic Product (GDP), with the economies of many countries collapsing if we allow global temperatures to rise 4 degrees by 2100.
Computable General Equilibrium (CGE) models are a standard tool for policy analysis and forecasts of economic growth. But they can be limited because the CGE models tend to be small, lumping countries together in some regions, or using assumed static price levels.
This was the concern of researchers who felt that climate change modeling needs to look at individual countries, with global trade and the known future effects of global warming taken into account in forecasting future pricing and profitability.
In a study published in Earth's Future, an open access journal of the American Geophysical Union, colleagues at the University of Melbourne, Australia National University, and CSIRO developed a large dimensional intertemporal CGE trade model to account for the various effects of global warming (e.g., loss in agricultural productivity, sea level rise, and health effects) on GDP growth and levels for 139 countries.
The GDP of countries in South East Asia and Africa will be most affected by a 4 degree increase in g...
The GDP of countries in South East Asia and Africa will be most affected by a 4 degree increase in global temperatures, however the model (pictured) doesn’t include the effects of extreme weather, which will increase the impact in Australia, Europe and North America.
Professor Tom Kompas, University of Melbourne
A conservative model
While this is the first large dimensional model to take into account damages from climate change for each of 139 countries who signed the Paris Climate Accord, it allows for a measure of extremes, without averaging, along with forward-looking behavior.
The model is also rather conservative, only taking into account four impacts of climate change - loss in agricultural productivity, sea level changes, human health and productivity effects. The model does not look at losses from extreme weather events or the increased frequency of fire damage.
Now, before everyone sinks into depression, there is some good news in this study. The research shows there is considerable global economic gains from complying with the Paris Climate Accord, which sets a goal of limiting global temperature increases this century to below 2 degrees Celsius.
And this one statement from this study should make people sit up and take notice because recent studies are showing that based on current emission levels and the continued rise in global carbon dioxide readings, we could see a 3.2 degrees Celsius increase in global temperatures on up to a 5.9 degrees Celsius increase.
A recent study published in Nature indicates a 93 percent chance that temperatures will exceed 4 degrees Celsius of warming with '"business as usual." In other words, if we don't take global warming seriously, we may end up living in a world similar to the Great Depression of 1929 = except it will be never-ending.
More about economic damages, Climate change, global trade model, Paris Climate Accord, business as usual
 
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