Anyone possessing even passing familiarity with the real world knows that the only connection between climate change and prosperity is that bad climate policy kills good economic growth. And while most of academia is famously detached from the real world, occasionally economists touch grass instead of merely positing it in a thought experiment. And thus Chapter 11 of last summer’s contrarian US Department of Energy climate report begins by reviewing comments made more than 30 years ago by economist Thomas Schelling who, in a speech about climate change to the American Economic Association, concluded “that in the United States, and probably Japan, Western Europe, and other developed countries, the impact on economic output will be negligible and unlikely to be noticed.” The IPCC itself only a decade ago said much the same thing: “For most economic sectors, the impact of climate change will be small relative to the impacts of other drivers.” Others since then have tried to argue for bigger hits to the economy from climate change, but as the chapter reports, studies reporting big costs that get lots of media attention never seem to hold up under close scrutiny. A sorry comment on the press as well as those studies.
The historical picture, which often gets overlooked by experts too wrapped up in their computer models, should lead us to expect climate to be unimportant for economies:
“Since 1900, the average global surface temperature anomaly warmed 1.3°C, about as much as the IPCC predicts will occur in the next century under a moderate emissions scenario. But even as the globe warmed and the population quintupled, humanity prospered as never before. For example, global average lifespan went from thirty-two years to seventy-two years, economic activity per capita grew by a factor of seven, and the death rate from extreme weather events plummeted by a factor of fifty.”
So far so good, you may say. But there’s more, because while news stories typically portray studies of the alleged future costs of warming as reducing wealth, the report instead notes correctly that:
“Climate change damage projections typically refer to reductions in how much life will improve for humanity, they don’t state that it will get worse in an absolute sense.”
The DoE team then goes through topics already familiar to CDN readers: extreme weather events are becoming relatively less costly over time, mortality risks are declining, extreme weather events are not impacting finance markets, and the cost of trying to stop climate change far exceeds any potential benefits, before turning to a classic piece of bad research.
In 2012 a group of economists at Harvard published a paper arguing that global warming would cut into the rate of growth of income of poor countries around the world, which would imply a much larger economic cost of climate change than previously believed. But the DoE team discusses a list of subsequent studies that tried to replicate that result and in almost every case failed to do so, instead finding that climate had either no effect on growth or one that was so small it didn’t matter in the context of everything else that would drive increasing standards of living.
Next: the Social Cost of Carbon alchemy.
