We are almost certainly underestimating the economic risks of climate change

This article discusses the economic risks of climate change, and how the models that inform climate policymaking are fatally flawed.

One of the more vexing aspects of climate change politics and policy is the longstanding gap between the models that project the physical effects of global warming and those that project the economic impacts. In a nutshell, even as the former deliver worse and worse news, especially about a temperature rise of 3 degrees Celsius or more, the latter remain placid.

The famous DICE model created by Yale’s William Nordhaus shows that a 6-degree rise in global average temperature — which the physical sciences characterize as an unlivable hellscape — would only dent global GDP by 10 percent.

Projections of modest economic impacts from even the most severe climate change affect climate politics in a number of ways. For one thing, they inform policy goals like those President Obama offered in Paris, restraining their ambition. For another, they fuel the arguments of “lukewarmers,” those who say that the climate is warming but it’s not that big a problem. (Lukewarmism is the public stance of most Trump Cabinet members.)

Climate hawks have long had the strong instinct that it’s the economic models, not the physical-science models, that are missing something — that the current expert consensus about climate economic damages is far too sanguine — but they often lack the vocabulary to do any more than insist.

As it happens, that vocabulary exists. At this point, there is a fairly rich literature on the shortcomings of the climate-economic models upon which so much political weight rests. (Here’s an old post of mine from 2015 bashing them.)

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