Guest essay by Eric Worrall
Read the words of a financially literate reporter struggling to reconcile the almost immeasurably small UN estimated economic impact of global warming against all the horror stories he desperately wants to believe.
How much will climate change really cost? It’s getting even more expensive.
Sep 27 2018 at 8:11 AM
by Tyler Cowen
The potential costs of climate change, already the subject of heated debate, may actually be understated.
It’s not just the potential disruptions to weather systems, agriculture and coastal cities; it’s that we may respond to those problems in stupid and destructive ways.
Consider how poorly we have responded to many non-climate-related problems.
Similarly you might think that supporters of President Donald Trump have legitimate concerns about illegal immigration and US unwillingness to stand up to China.
Still, that did not require a presidential “remedy” that has brought chaos and corruption to the White House and US foreign policy alike.
In short, the world increasingly appears to be reaching for extreme and imprudent remedies to admittedly complex problems.
I am struck by the costs of climate change suggested in the UN’s Intergovernmental Panel on Climate Change report, hardly a source of denialism.
Its cost estimate – “1 to 5 per cent of GDP for 4C of warming” – is relatively reassuring.
After all, global GDP is right now growing at more than 4 per cent a year.
If climate change cost “only” 4 per cent of GDP on a one-time basis, then the world economy could make up those costs with less than a year’s worth of economic growth.
In essence, the world economy would arrive at a given level of wealth about a year later than otherwise would have been the case.
That sounds expensive but not tragic.
Unfortunately, that is not the right way to conceptualise the problem.
Think of the 4 per cent hit to GDP, if indeed that is the right number, as a highly unevenly distributed opening shot.
That’s round one, and from that point on we are going to react with our human foibles and emotions, and with our highly imperfect and sometimes corrupt political institutions.
The true potential costs of climate change are just beginning to come into view.
While we leave Tyler to wrestle with his inner climate skeptic, its fun to imagine other ways to visualise the horror of the UN estimated impact of 4C of global warming (AR4).
Compare US economic growth under President Trump compared with the growth rate President Obama presided over. According to Bloomberg, President Obama managed 1.9% economic growth per annum. So far President Trump has managed 2.7%. This means the total economic damage the UN estimates will accrue due to 4C of global warming is comparable to the difference between two terms of President Obama vs two terms of President Trump; 8 * 0.8% difference = 6.4%. (before anyone gets picky I know growth accumulates geometrically…).
Of course, we’re not talking about concentrated harm like 4C of global warming over eight years, or two actual terms of President Obama. But I think The Obama (equivalent 2C warming) is potentially a useful measure of UN estimated climate economic damage which we should all consider using in future, in honour of the President who made climate activism so central to his term of office.