A Scorecard for Humanity: Climate Change, Tol

Assessment Paper

A version of the working paper is available for download here. The finalized paper has been published in How Much Have Global Problems Cost the World? A Scorecard from 1900 - 2050 by Cambridge University Press.

An Assessment Paper on climate change was written by Richard S.J. Tol and released as a chapter in How Much Have Global Problems Cost the World?

Climate change is real and man-made. It will come as a big surprise that climate change from 1900 to 2025 has mostly been a net benefit, rising to increase welfare about 1.5% of GDP per year. Why? Because global warming has mixed effects and for moderate warming, the benefits prevail. The increased level of CO₂ has boosted agriculture because it works as a fertilizer and makes up the biggest positive impact at 0.8% of GDP. Likewise, moderate warming avoids more cold deaths than it incurs extra heat deaths. It also reduces the demand for heating more than increases the costs of cooling, totaling about 0.4%. On the other hand, warming increases water stress at about 0.2% and negatively impact ecosystems like wetlands at about 0.1%. Storm impacts are very small, as the total storm damages (including naturally caused storms) are about 0.2%.

As temperatures rise, the costs will rise and the benefits decline, leading to a dramatic reduction in net benefits. After year 2070, global warming will become a net cost to the world, justifying cost-effective climate action.

Short summary

There is a substantial literature about the future impacts of climate change. Less is known, however, about the impacts of climate change in the past. While there is no immediate policy relevance of estimates of past effects – as liability is yet to be established– such estimates would serve to validate models of future impacts – and thus help to improve these models and build confidence. In this chapter, we turn this question on its head. The paper uses a model to backcast past impacts, thus generating hypotheses to be tested against observations.

Unfortunately, there are no direct observations of the economic impact of past climate change. Note that the cause of climate change, past or future, is irrelevant for its impacts. There are, however, some studies that estimate particular aspects of the impact of past climate change, typically focussing on biophysical impacts.

The literature on natural disasters is perhaps most advanced. These studies typically conclude that trends in the damage done by natural disasters are largely, if not entirely, the result of increases in the number of people and their wealth. It should be noted, though, that these studies rely on ad hoc normalisation rather than multiple regression.

Estimates of the impact of past climate change on crop yields generally find a significant effect, but one that is small relative to other trends in agriculture; impacts are positive or negative depending on crop and location. Carbon dioxide concentrations vary little over space and only slowly over time, so there is little statistical evidence of its impact on crop yields. Experimental evidence, however, points to a positive impact.

The impact of past climate change on malaria has also been the subject of intense debate. Overall, there is agreement that climate change is not the main driver of the spread of malaria; some people argue it has a small effect while others argue the effect is negligible. The story is the same for diarrhoea – another big killer that is sensitive to weather and climate – but there is less evidence. There is empirical evidence for negative health impacts of both heat and cold stress. The net impact is different across space.

Empirical research into the effect of climate change on energy demand resembles that of heat and cold stress: There are many case studies, but few multi-country studies. The latter studies are, of course, best suited for the detection of structural patterns that would allow extrapolation into the future. These studies find that warming would lead to a decrease of energy demand in winter and an increase of energy demand in summer. The relative magnitude of these two opposite effects depends on socio-economic circumstances and the climatic starting point.

Statistical analyses of climate and water resources are typically done for single river basins. There are a few studies that cover a wider area. These studies typically conclude that every river responds differently to changes in precipitation and temperature.

In sum, the empirical literature on the impacts of climate change finds mixed effects. Unfortunately, none of these studies aggregates the impacts, so that it is difficult to say whether past climate change was positive or negative.