The impact of climate change on economic growth

This fundamental question, which underlies the costs and benefits of climate change policy, is addressed by a study published today by IOP Publishing in the journal Environmental Research Letters and conducted by researchers at the University of California, Davis. The research revisits the effect of rising global temperatures and climate change on Gross Domestic Product, or GDP, using an empirical approach.

It was discovered that economic growth is affected by persistent temperature shocks over at least a decade in approximately 22 percent of the countries studied.

Economic growth is affected by persistent temperature shocks.

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

Persistent and cumulative

Previous studies estimated the delayed impact of temperature on GDP in succeeding years to investigate the issue, but the findings were not conclusive. UC Davis scientists and co-authors from Italy's European Institute on Economics and the Environment used a novel method to isolate the persistent temperature effects on the economy by analyzing lower modes of oscillation of the climate system in this study.

For instance, the El Nio Southern Oscillation, a 3–7 year temperature variation in the Pacific Ocean, influences global temperature and precipitation patterns. "By looking at the GDP effects of these types of lower-frequency oscillations, we're able to distinguish whether countries are experiencing temporary or persistent and cumulative effects," Bastien-Olvera said. To eliminate more frequent yearly changes in temperature, the team used a mathematical technique called filtering.

Enormous task

The researchers note that characterizing the effects of temperature on the economy is a monumental task that cannot be accomplished by a single research group.

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

Journal Reference: B A Bastien-Olvera, F Granella, F C Moore. Persistent effect of temperature on GDP identified from lower frequency temperature variability. Environmental Research Letters, 2022; 17 (8): 084038 DOI: 10.1088/1748-9326/ac82c2