Guest essay by Eric Worrall
According to Dana, the wrath of Gaea will strike down Trump voters unless Republican leaders embrace a Carbon Tax.
Global warming will depress economic growth in Trump country
Mon 7 May 2018 20.00 AEST
It’s global warming that will hurt the economy in red states, not a carbon tax.
A working paper recently published by the Federal Reserve Bank of Richmond concludes that global warming could significantly slow economic growth in the US.
Specifically, rising summertime temperatures in the hottest states will curb economic growth. And the states with the hottest summertime temperatures are all located in the South: Florida, Louisiana, Texas, Mississippi, Oklahoma, Alabama, Georgia, South Carolina, Arkansas, and Arizona. All of these states voted for Donald Trump in 2016.
House Majority Whip Steve Scalise, who represents Louisiana (the second-hottest state), recently introduced a new anti-carbon tax House Resolution. Scalise introduced similar Resolutions in 2013 with 155 co-sponsors (154 Republicans and 1 Democrat) and in 2015 with 82 co-sponsors (all Republicans). The latest version currently only has one co-sponsor, but more will undoubtedly sign on. All three versions of the Resolution include text claiming, “a carbon tax will lead to less economic growth.”
As the economics research shows, failing to curb global warming will certainly lead to less economic growth. Climate policies could hamper economic growth, but legislation can be crafted to address that concern.
In short, if Trump, Scalise, and the rest of the Republican Party want to prevent slowed economic growth in red states, they should be trying to craft an optimal carbon tax, not blindly rejecting the idea outright.
The abstract of the study;
Temperature and Growth: A Panel Analysis of the United States
Riccardo Colacito, Bridget Hoffmann, Toan Phan
We document that seasonal temperatures have significant and systematic effects on the U.S. economy, both at the aggregate level and across a wide cross-section of economic sectors. This effect is particularly strong for the summer: a 1oF increase in the average summer temperature is associated with a reduction in the annual growth rate of state-level output of 0.15 to 0.25 percentage points. We combine our estimates with projected increases in seasonal temperatures and find that rising temperatures could reduce U.S. economic growth by up to one-third over the next century.
The study seems to be attempting to infer the impact of climate shifts by studying the impact of temperature anomalies on productivity. In my opinion this is a dubious inference. People who are used to higher temperatures do not suffer the same productivity declines as people who might be less used to such temperatures when they experience abnormally warm weather. Warm states like California and Texas are not at the bottom of US productivity or income bands, which suggests other factors which contribute to the prosperity of different states may be more important than their Summer temperature.
The study authors attempt to address this issue in section 3.4 Stability of the effects through time, but admit that they cannot draw statistically reliable conclusions about people’s ability to adapt to warmer temperatures post 1990 in fall (i.e. when people are back at work).
… We re-run the regression specified in equation (4) but delay the beginning of the sample by one year at a time. We repeat this exercise until the sample starts in 1990; past this year, the sample size becomes very small, thus compromising the power of our estimation. The results, reported in figure 3 show that the summer coefficient remains negative and statistically significant at the 10% level as the sample shrinks; the point- estimate for the summer effect is −0.154 in the full sample and −0.246 in the post-1990 sample. However, the fall coefficient is no longer statistically significant in the post-1990 sample; the point-estimate for the fall effect is 0.102 in the full sample and 0.031 (and indistinguishable from zero) in the post-1990 sample. This finding is consistent with the results of our robustness checks (section 5.3): the summer effect is very robust, but the fall effect is not. …
Read more: Same link as above, page 17
The study author’s exploration of mechanisms by which the warmer temperatures have their alleged long term negative impact on productivity includes gems like the following;
… Our results are in line with other findings in the literature. For example, Cachon et al. (2012) document that heat and snow significantly affect output and productivity in automobile plants. The occurrence of six or more days with temperatures above 90 degrees Farenheit reduces the weekly production of U.S. automobile manufacturing plants by an average of 8 percent. Given that automobile manufacturing largely takes place indoors, the authors argue that this finding suggests there are limitations of air conditioning; it is possible that there are important areas in the production process, such as loading and unloading areas, that are difficult to cool or warm. Bloesch and Gourio (2015) also document that cold weather negatively affects production in various industries. We will return to this discussion in the industry analysis below. …
Read more: Same link as above, page 20
Even if we accept the premise of the study, climate science is far from certain about the extent of future warming; even the IPCC admits climate sensitivity could plausibly be as low as 1C / doubling of CO2. 1C / doubling would produce maybe half a degree of extra warming if we burned all known remaining fossil fuel reserves.
… Estimates of the Equilibrium Climate Sensitivity (ECS) based on multiple and partly independent lines of evidence from observed climate change indicate that there is high confidence that ECS is extremely unlikely to be less than 1°C and medium confidence that the ECS is likely to be between 1.5°C and 4.5°C and very unlikely greater than 6°C. These assessments are consistent with the overall assessment in Chapter 12, where the inclusion of additional lines of evidence increases confidence in the assessed likely range for ECS. …
Read more: Page 871 WG1 AR5 Chapter 10
The study seems to ignore the qualitative impact of technology advances on productivity, even advances which are obviously in the pipeline. Study authors suggest that some outdoor activities such as agriculture and assembly lines are difficult to air-condition, but its more than obvious even today that robots are completely transforming outdoor work. My trash these days is collected by an operator in an air-conditioned truck who picks up trashcans with a robot arm; the days of groups of men following trucks, picking up trashcans by hand, are long gone.
Predicting economic conditions at the end of the century in terms of today’s society is absurd. By the end of the century our descendants will enjoy technologies and productivity advantages we have no idea will exist. Even if temperatures do rise uncomfortably, it is very unlikely farmers 80 years from now will simply put up with any problems, instead of trying to address them.
Update (EW): Clarified that the statistical insignificance of the post 1990 impact of temperature on productivity applies to fall temperatures rather than Summer temperatures