Is climate change currently good for the world economy?

Question

Bjorn Lomborg has just edited a new book How Much have Global Problems Cost the World? (Kindle version here) in which he assembles economic analysis of the world's major challenges. The point of the exercise is to encourage decision-makers to focus on the right things which is important if we are to deal with the challenges effectively. The book contains historic analysis and some attempt to forecast forward to 2050.

In the book arguments are presented suggesting climate change has, so far, been good for the world. Lest this seems an outrageous claim here is a passage from a recent article summarising some of the argument:

Yes, global warming is happening. In the long run, it has an overall negative impact. But actually — and surprisingly for many — economic models generally find that moderate global warming is a net global benefit. Worldwide and in almost all regions, many more people die from cold than heat. With increasing temperatures, avoided cold deaths will vastly outweigh extra heat deaths. By midcentury, researchers estimate 400,000 more heat deaths but 1.8 million fewer cold deaths.

...

Likewise, CO2 fertilizes crops and will increase production more in temperate countries than it will slow down crop increases in tropical countries. It will reduce heating costs more than it will increase cooling costs.

A new study by climate economist Richard Tol that is featured in my forthcoming book, How Much Have Global Problems Cost the World?: A Scorecard From 1900 to 2050, shows that since 1900, global warming has been an increasing net benefit for humanity and will peak around 2025 with an annual benefit of about 1.5% of GDP. Only toward the end of the century will global warming turn to a net loss — so while we need to do something, it must be cost-effective.

Is his argument right? Has global warming been a net benefit to the world economy so far?

Answer 1

The first quote presents a specious argument as I rather doubt the heat and cold related deaths includes deaths due to famine, which often involve crop-failures where weather/climate was an issue, which can easily affect hundreds of thousands or even millions in a single year, which clearly outweighs Lomborg's "by mid-century" figures. The recent famine in Somalia alone is estimated to have resulted in 258,000 deaths. Much of the worlds populations depends on the productivity of agricultural land already becoming marginal. The greatest agricultural effects of climate change are likely to be due to changes in rainfall, and sea level rise (much of Bangladesh, a very populous country, is low lying and already susceptible to flooding) rather than the direct effects of increased temperature.

The evidence for the "CO2 is plant food" argument is also at best equivocal. Increased CO2 may increase gross primary production in areas where sunlight, water and the availability of nutrients are not already the limiting factors. Increasing CO2 may benefit some plants and disadvantage others (via the effects of climate change on temperature and precipitation), and it is far from clear that there will be a net benefit (see SkS link given below for more details and links to the peer reviewed literature).

The quote "A Scorecard From 1900 to 2050, shows that since 1900, global warming has been an increasing net benefit for humanity and will peak around 2025 with an annual benefit of about 1.5% of GDP." is a rather specious argument if used to argue against climate change mitigation. A net benefit can be achieved by providing a very large benefit to a few at the expense of catastrophic loss to millions. Just because something is a net benefit in terms of GDP, that doesn't mean that it is a net benefit to humanity. Note Tol also goes on to say "Only toward the end of the century will global warming turn to a net loss — so while we need to do something, it must be cost-effective.", this is basically saying that the net loss will be someone else's problem, so why should I care? Economists have a name for this which is "discounting". I would agree that any action should be cost effective, but it needs to be based on a full analysis of the costs and benefits.

Update, Prof. Tol supports some of what I have said above in a recent paper, for which the abstract is given below (emphasis mine)

The national version of FUND3.6 is used to backcast the impacts of climate change to the 20th century and extrapolate to the 21st century. Carbon dioxide fertilization of crops and reduced energy demand for heating are the main positive impacts. Climate change had a negative effect on water resources and, in most years, human health. Most countries benefitted from climate change until 1980, but after that the trend is negative for poor countries and positive for rich countries. The global average impact was positive in the 20th century. In the 21st century, impacts turn negative in most countries, rich and poor. Energy demand, water resources, biodiversity and sea level rise are the main negative impacts; the impacts of climate change on human health and agriculture remain positive until 2100.

Which suggest that currently (i.e. post 1980), climate change is beneficial for already rich countries but has a negative impact on poor countries. GDP is only one measure of the economy and increasing GDP isn't necessarily an indicator of the health of the global economy if it results in a greater polarisation of rich and poor countries.

SkepticalScience.com has a number of pages with relevant information, including "its not bad", "animals and plants can adapt", "CO2 is plant food", "how big is the carbon fertilisation effect", which all contain links to the primary literature on relevant issues. The IPPC reports would also be well worth reading, as assessing the cost of the impacts of climate change is the subject of the reports from working groups 2 and 3.

Incidentally, a Google scholar search for "effect of climate change on GDP" provides "Climate change is already damaging global economy, report finds", Climate Change Reducing Global GDP by $1.2 Trillion, etc. The IPCC say:

"Most of the aggregate impacts reported in IPCC (1996) were of the first type; they monetised the likely damage that would be caused by a doubling of CO2 concentrations. For developed countries, estimated damages were of the order of 1% of GDP. Developing countries were expected to suffer larger percentage damages, so mean global losses of 1.5 to 3.5% of world GDP were therefore reported."

And the Stern Review also comes in strongly in favour of mitigation on economic grounds, so I would suggest that the idea that climate change is good for the world economy is at best, highly equivocal.