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According to UCL researchers, economic models of climate change could have significantly underestimated the cost of continued warming.
The work of an international team of scientists was published today in Environmental Research Letters. It found that the economic damages could be six times greater by the end century than previously thought.
These projections help governments all over the globe calculate the relative benefits and costs of reducing greenhouse gas emissions. However, previous analysis has shown that models may overlook important risks and underestimate the costs.
Most models currently focus on the short-term, and assume that climate change will not have a lasting impact on economic growth despite increasing evidence to the contrary. Because of the impact they have on savings, health, and labor productivity, extreme events such as droughts, fires and heatwaves can cause long-term economic damage.
The study authors updated the first of three climate-economy model used to determine the carbon price for national policy decisions. They then used the model to examine the effects of climate variations over the past year and to assess economic recovery rates after climate events.
When taking into account the effects of climate change and economic growth, the study suggests that global GDP could fall by 37% by 2100. Without taking into account the effects of climate change on economic growth, GDP would drop by around 6%.
There is still uncertainty over how climate damage will affect long-term growth, and how societies can adapt to minimize these damages. Depending on the extent of growth affected, the economic cost of warming this century could reach 51% of global GDP.
Chris Brierley, co-author of the study (UCL Geography), says that while we don't know how much climate change will affect long-term economic growth, it is unlikely to be zero as many economic models assume.
Climate change is making it more likely that climate change will lead to catastrophic events such as the recent heatwave in North America or the flooding in Europe. The costs of climate change are much more expensive than we think. We must stop believing that economies will recover from such events in a matter of months. While we still have a lot to learn about how climate affects economic growth, it is clear that cutting emissions is more urgent than ever.
Researchers also updated the model in order to account for advances in climate science over past decade, as well the impact of climate change on variability of annual average temperaturesboth which have increased the projected cost associated with climate change.
These authors calculated the impact of these changes on SCCO2, the social cost of carbon. This is a key indicator of the urgency of taking climate action. It calculates the economic costs of greenhouse gas emissions to society. Estimates vary widely between $10 and $1,000, with the cost per ton of CO2 expressed in US dollars. This new study, however, suggests that the economic cost of carbon dioxide could be more than $3,000 per tonne.
Burning CO 2 is costly for society, even though it does not directly impact our pockets. Dr. Brierley stated that each person's CO2 emissions could result in an annual cost to humanity exceeding $1,300, which can rise to $15,000 if the effects of climate change on economic growth and other factors are considered.
Although there are many uncertainties in the results, they were much higher than what policymakers assume. The US government uses a social cost for carbon of $51 per ton, while the EU Emissions Trading Scheme (which covers power, manufacturing, and aviation) recently exceeded 61.
Paul Waidelich (ETH Zrich), co-author of the study, stated that "the findings confirm it is cheaper than to reduce greenhouse gas emission. The economic damages from continuing warming would greatly outweigh any costs that could be associated with preventing them." It is imperative to act quickly and strongly to mitigate the risk of higher costs than was previously thought. This shows that avoiding reducing greenhouse gas emissions is a very risky economic strategy.
Jarmo Kikstra, a former UCL MSc student, is the study lead author. He says it is difficult to estimate the total costs of climate change. However, there has been an increase in scientific evidence that has led to improved economic estimates. The science of climate change has advanced a lot in the last decade. However, the cost-benefit estimates have not changed much.
"How the economy will react to future climate impacts is a much more uncertain question. If we examine the long-term effects of climate change on economies, it is clear that costs could rise if we don't take climate action.
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Jarmo S Kikstra et al., The social cost carbon dioxide under climate economic feedbacks and temperature variability. Environmental Research Letters (2021). Information from the Journal: Environmental Research Letters Jarmo S Kikstra et al., The social cost carbon dioxide under climate feedbacks and temperature variability. (2021). DOI: 10.1088/1748-9326/ac1d0b