Climate change has severe environmental and human consequences and threatens economic stability. A new report examines cutting-edge, integrated research that supports the economic case for immediate climate action.
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Due to methodological difficulties in attempting to assess all climate impacts, economic studies analyzing the benefits and costs of aspirational and rapid climate action have battled to build a strong case.
A new study examines a novel approach to projecting economic impacts along climate mitigation pathways, discovering that near-term emissions reductions are globally economically optimal, with central estimates for “optimal warming” of 1.8–1.9 °C by 2100.
Climate change cost-benefit analyses usually fall into one of two categories. The first group employs statistical methods to assess the relationship between climate and weather patterns and economic productivity. While progress has been made in this area, such approaches remain a “black box”—it is difficult to link economic productivity to heat or drought-related mortality.
The second group tends to add up different climate impacts calculated in a more transparent and comprehensive manner, but it is unable to measure all impacts and their interactions over time.
According to the assessment, which was published in Nature Climate Change, a ground-breaking approach has built on early research with increased detail, integrating some of the interaction between sectors, and enhancing previous studies’ methods. In three integrated assessment models, the new study evaluates the relative benefits and costs of climate mitigation and climate impacts.
When simulating future climatic and economic trajectories, these models have typically concentrated on mitigation, with few multi-model studies of in-depth economic effects along these pathways. To close the gap, the report examines all of these variables together to quantify the economically optimal emissions reductions and global temperature trajectories for each model.
The models’ damage functions, which relate GDP to temperature and sea-level rise, consider the effects on forestry, agriculture, fisheries, floods, road infrastructure, energy supply and demand, and labor productivity. The experts calculated that the preventable damages are 1.5-3.9 times greater than the costs of climate mitigation using this novel approach. In other words, every euro invested in climate solutions saves the world between 1.5 and 4 euros in climate change effects.
This new, more integrated approach is a reminder that there has been a disconnect between climate economics and holistic analyses, drawing on multiple lines of evidence. With this new study, this disconnect seems to be getting smaller, with global economics also supporting strong climate action.
Jarmo Kikstra, Researcher, International Institute for Applied Systems Analysis
Jarmo Kikstra concludes, “It is clear that what is economically optimal is (still) not fully aligned with global climate targets. However, while economists may historically not have been able to provide the strongest arguments, new studies such as this one increasingly support urgent climate action.”
Kikstra, J. S. & Waidelich, P. (2023). Strong climate action is worth it. Nature Climate Change. doi.org/10.1038/s41558-023-01635-2.