DeepSummary
In this episode, hosts Brock Vanfill and Ty Ben Affleck discuss a groundbreaking economic study by Dr. Adrien Bilal and Dr. Diego Kaenzig that suggests climate change will have a much greater impact on global GDP than previously estimated. The study uses a new approach that considers global temperature changes, rather than local variations, and finds that a one-degree Celsius increase in global temperatures could lead to a 12% decrease in world GDP, significantly higher than the 1-3% estimated by conventional models.
The episode explores the methodology used in the study, including the use of temperature shocks, the impact on factors like capital and total factor productivity, and the incorporation of extreme weather events. The findings align more closely with the concerns raised by climate scientists about the potential economic consequences of a rapidly warming planet.
The conversation also covers the implications of the study for policies and decision-making, such as the social cost of carbon, which the study estimates to be over $1,000 per ton, much higher than current estimates used by governments and institutions. The researchers discuss the importance of considering both global and domestic impacts, as well as the potential for adaptation strategies.
Key Episodes Takeaways
- A new economic study by Dr. Adrien Bilal and Dr. Diego Kaenzig suggests that climate change will have a much greater impact on global GDP than previously estimated by conventional models.
- The study uses a novel approach that considers global temperature changes, rather than local variations, and finds that a one-degree Celsius increase in global temperatures could lead to a 12% decrease in world GDP.
- The findings align more closely with the concerns raised by climate scientists about the potential economic consequences of a rapidly warming planet.
- The study estimates the social cost of carbon to be over $1,000 per ton, significantly higher than current estimates used by governments and institutions.
- The researchers highlight the importance of considering both global and domestic impacts, as well as the potential for adaptation strategies.
- The findings have significant implications for policies and decision-making related to climate change mitigation and adaptation.
- The study quantifies the economic cost of global warming that has already occurred, underscoring the significant impact on global GDP even with relatively modest temperature increases.
Top Episodes Quotes
- “Our numbers for like, a shock to global temperature are that an increase in global temperature by one degree celsius leads to a fall in world real GDP by around 12%. So it's by an order of magnitude larger than previous estimates, which, I mean, first, when we got this number, we were also kind of shocked.“ by Adrian Bilal
- “So once we used our, you know, the empirical estimate of, you know, this 12% GDP loss per degree Celsius and used that as a target for a dice like economy. You know, we were, we ended up in a position to come up with the social cost of carbon estimate, and we found that the social cost of carbon, if you use that empirical target, is actually in excess $1,000 per ton.“ by Diego Kanzig
- “And even if you look at the lower bound of these estimates, they're like still an order of magnitude larger than previous estimates.“ by Adrian Bilal
- “Framing it like this is jarring and it's scary, especially as we look around at countries mired in wars today and basically how their economies have been decimated and the real hardships that are experienced by people living in those countries. As a result.“ by Ty Ben Affleck
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Episode Information
The Climate Pod
The Climate Pod
5/15/24
In 2018, economist William Nordhaus won the Nobel Memorial Prize in Economic Sciences for his Dynamic Integrated Climate-Economy model, which was the first neoclassical growth model to incorporate the impacts of a warming planet on the global economy. While celebrated for its economic innovations, the DICE model and its outputs have been criticized by climate scientists for not adequately considering the devastating impacts that a rapidly warming planet will have on the environment, human wellbeing, and the economy. Conventional attempts of forecasting GDP impacts of a one degree increase in global temperatures using the DICE model typically produce estimates of little more than a 1% decrease in global GDP. Critics argue that by downplaying the future economic costs resulting from a warming planet, these types of economic models make it easier for policymakers to justify delaying actions now to reduce emissions and slow or even stop global warming.
But in a new paper titled "The Macroeconomic Impact of Climate Change: Global vs Local Temperature", Dr. Adrien Bilal and Dr. Diego Kaenzig unveil a new model to predict the impact that global warming will have on the global economy. Their findings suggest previous studies were significantly off and, in fact, global GDP will be drastically reduced if the planet continues to warm on its current trajectory. Dr. Bilal and Dr. Kaenzig join The Climate Pod to discuss their new paper, how their approach differed from previous attempts at quantifying the economic impact of climate change, and what this means for policymakers.
Dr. Adrien Bilal is an Assistant Economics Professor at Harvard University.
Dr. Diego Kaenzig is an Assistant Economics Professor at Northwestern University.
Read the paper here: https://www.nber.org/papers/w32450
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