Destroy One-Third of Global GDP With This One Weird Trick

Climate change is expensive. This is confirmed over and over, in study after study, in projections and in analyses of money already spent. But all those analyses might still be underselling the issue.

A new working paper from the National Bureau of Economic Research finds that every 1 degree Celsius of warming knocks out 12 percent of global GDP. (The world has already warmed at least 1.2 degrees C and we’re pretty rapidly heading for the 1.5-degree target set forth in the Paris Agreement, if you’re scoring at home.) A “moderate warming” scenario yields an overall 31 percent loss of global welfare. Going back to 1960, they estimate that climate change has shaved 37 percent off of global GDP per capita — we’d all be that much richer if no warming was present.

They also calculate the social cost of carbon, a measure of the damage of each ton of carbon emitted into the atmosphere, at $1,056 per ton. It was considered an impressive coup for the Biden administration to start using $190 per ton recently; if a thousand-dollar valuation was actually placed on each ton of greenhouse gas pollution, things like direct air capture start to make a lot more economic sense.

The new estimate of the hit to global GDP is “multiple orders of magnitude” above other estimates, thanks to a slightly differing methodology that correlates global temperature shocks with extreme climatic events. From the authors, Adrien Bilal and Diego R. Känzig: “These effects are comparable to having a major war fought domestically, forever.” Great!