Study examines impact of rising global temperatures on GDP

From crop damage to cooling failures in cloud-based data centers, climate change affects a wide variety of economic sectors. It is unclear whether a country’s economy can rebound each year from these impacts or whether global temperature increases have permanent and cumulative effects on the market economy.

A study from the University of California, Davis, published today by IOP Publishing in the journal Environmental Investigation Letters, addresses this fundamental question, which is likely the costs and benefits of climate change policy. The research uses an empirical approach to review the effect of rising global temperatures and climate change on gross domestic product, or GDP.

It found that economies are sensitive to persistent thermal shocks over at least 10 years and have an effect on economic growth in about 22% of countries analyzed.

“Our results suggest that many countries are likely experiencing persistent temperature effects,” said lead author Bernardo Bastien-Olvera, who holds a Ph.D. candidate at UC Davis. “This contrasts with models that calculate measures like the social cost of carbon, which primarily assume temporary impacts of temperature on GDP. Our research adds to evidence suggesting that the impacts are far more uncertain and potentially larger than previously thought.”

Persistent and Cumulative

Previous research has examined the dilemma by estimating the delayed effect of temperature on GDP in subsequent years, but the results have been inconclusive. With this study, scientists from UC Davis and co-authors from the European Institute of Economics and the Environment in Italy used a new method to isolate the persistent effects of temperature on the economy by analyzing the lower oscillation modes of the climate system.

For example, El Niño Southern Oscillation, is a 3 to 7 year temperature fluctuation in the Pacific Ocean that affects the temperature and precipitation in many parts of the world.

“By examining the effects on GDP of these styles of low frequency oscillations, we are able to distinguish whether countries experience temporary or persistent and cumulative effects,” said Bastien-Olvera.

The team used a mathematical procedure called filtering to remove higher frequency annual temperature changes.

Huge task

Researchers n note that characterizing the impacts of temperature on the economy is an enormous task that is unlikely to be entrusted to a single research group.

“The availability of data and the “Current magnitude of climate impacts limit what can be done globally at the country level,” said co-author Frances Moore, assistant professor of environmental science and policy and UC Davis and principal investigator of the study, “However, our research constitutes a new piece of evidence in this puzzle and provides a new tool to answer this still unresolved question.”

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