Global Warming is Increasing Economic Output

Welcome to a lesson in unbiased observation of the world around us.  True science is not political, not emotional, and doesn't care if it is proven wrong again and again.  Theories are developed based on empirical data, and if data presents itself that contradicts a theory of the world, that theory is modified or thrown out.  This is the primary tenant of science.  In the words of Sherlock Holmes,

"It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts."

-A Scandal in Bohemia

The Cost of Climate Change

One assumed consequence of global warming or climate change is that continued temperature increases and more severe weather will result in serious economic damage, forcing us to pay more and more for the same level of comfort.  Effects of this include the flooding of coastal cities from the sea level rising, worse crop output due to more frequent droughts and floods, and heavier property damage from hurricanes and other storms.  While blaming a particular weather event on climate change can be difficult to prove, quantifying the economic value of that damage is nearly impossible.  To truly determine the effect a particular event has on society, however, an apples-to-apples comparison needs to be made, one which is most easily done by assigning a monetary value to it.

How do you value sea level rise, though?  How do you value a drought or a flood?  Certainly something like a hurricane can be valued fairly easily, as it is done all the time, but that only tells part of the story.  Hurricanes have been around far longer than man-made climate change, so the total damage caused by a hurricane cannot be attributed to global warming alone.  What percentage of a hurricane's damage is man-made, and what percentage is natural?  These are questions that are being hotly debated in scientific and economic circles, but no one can come up with an answer that is readily accepted by a majority of people.  The only thing most people can agree on is that climate change is having an economic effect on civilization on some level.

Determining the Economic Impact of Global Warming and Avoiding Confirmation Bias

Even being presented with these challenges, many people have tried to determine a net cost of climate change.  Determining this amount is actually quite important, because it provides governments with a cost they should be willing to spend to combat it.  Should the United States spend one million dollars?  One billion?  One trillion?  It is hard to convince anyone, especially those in government, to spend money on a project if you cannot provide even a rough guess as to the consequences of not spending that money.  So far, however, no one has been able to develop good, fact-supported numbers that place a value on all effects of climate change.  There have been many attempts made, such as those by the NRDC, but they generally only focus on portions of the world or only portions of the effects.

One trap that many people get into is they fall into confirmation bias, or one's tendency to favor data that supports their initial theory.  This is human nature, but must be vehemently avoided in science, as it will quickly skew the results of any study, always to the detriment.  Groups like the NRDC and Greenpeace are generally well-intentioned, but their strong emotional ties to the causes they fight for taint the results of any research they may do.  Even organizations that are supposed to be unbiased on climate change show signs of being swayed by confirmation bias.  The UN recently started the Global Commission on the Economy and Climate Change, which is tasked wither determining the costs and benefits of acting against climate change, but not the benefits of climate change itself.  A study from earlier this year projected the cost of climate change to be $60 trillion, but did not even bother to look at any potential positive aspects to climate change like crop yields or reduction in deaths due to cold weather.  The assumption is that climate change is bad for the planet, so any studies on it only look for the negative aspects, confirming the initial bias that climate change is bad.  You can see how this hurts scientific progress.

New Research Suggests Climate Change has a Net Positive Impact on the Economy

To try and collect empirical data regarding climate change's economic impact to the world, new research done by the Copenhagen Consensus and published in the book How Much have Global Problems Cost the World?: A Scorecard from 1900 to 2050 collects data from many studies on climate change and other problems like malnutrition and attempts to determine the economic cost of each from 1900 through 2050.  To normalize the costs of each worldwide problem, the study calculates the percent of worldwide gross domestic product (GDP) change due to things like education, air pollution, sea level rise, increased carbon dioxide (CO₂) concentration, and a warmer climate.  After collecting the data provided by many researchers, the net effect of climate change on worldwide GDP is calculated at +1.3%, a net positive on the world economy.

Calculating Net Economic Impact of Global Warming

This seems counter-intuitive, as just about everyone who believes climate change is happening "knows" it is damaging our planet in irreparable ways.  How could climate change be increasing worldwide economic output, when we are already seeing increased droughts and floods, stronger hurricanes, and rising sea levels?  As it turns out, all those are having a negative impact on the economy, but they are outweighed by the positive impacts, primarily from increased crop yield due to higher CO₂ concentrations in the atmosphere.  The breakdown is as follows:

• Increased CO₂ concentration: +0.8% GDP due to better crop yields
• Warmer weather: +0.4% GDP due to less cold-related deaths, less heating costs
• Water stress: -0.2% GDP 
• Ecosystem damage: -0.1% GDP
• Storm severity: -0.2% GDP due to increase in storm strength and frequency
• Other factors: +0.6% GDP

Global average sectoral economic impact of climate change from 1900 to 2100 as a function of time.
Screenshot from The Economic Impact of Climate Change in the 20th and 21st Centuries.

So this means climate change is actually good for us, and we should not be worried.  Well, not really.  These numbers are based on today, 2013, but the study also projects back to 1900 and out to 2100.  Looking into the future, the study predicts climate change will start having a net negative impact on the economy around 2070, meaning climate change will really start to cost us towards the second half of this century.  And this doesn't take into account aspects of the world that are harder to value, such as the value of a more diverse ecosystem.  Accounting for the intangibles, the net effect of climate change will likely be negative far earlier than this study suggests.

I am also assuming for the moment that this study is right at all.  While it is a collection of data from multiple sources, it is still just one study, and until more data and more studies come out that corroborate the conclusions the researchers have made, many people will be questioning the validity of the entire study and its methodology.  Based on the diverse data sources and transparent methodology, however, the study does appear to have some merit, and I hope to see more from independent groups that can provide research to either support or discredit this study.

Is it Really Worth Combating Climate Change?

The results of this study do pose a couple interesting questions, though.  First, rather than trying to answer the question of how much should we spend on climate change mitigation, the question should be whether we try to mitigate climate change at all.  If the rise in global temperatures over the last century has provided a net positive impact on economic output, should we really strive to return to earlier CO₂ levels?  I think the answer is still yes, especially since the economic benefit continues to decline the higher the CO₂ concentration gets, and there are numerous factors that are not well understood that could easily tip the scales in the negative direction.  Still, it is interesting to think about, and having this dialog openly is good for scientific debate.

The second question is a bit more open-ended.  What is the value of ecosystem and how would you go about placing a value on it in the first place?  If it could be shown unequivocally that damage to the ecosystem and biodiversity would not hurt civilization or the welfare of mankind, what value would you place on it?  Is it worth spending significant resources, say $10 trillion, to protect the current ecosystem if that money would not help the welfare of mankind?  I think most people would still say yes to some level of spending, but what is the value people really place on the ecosystem, separated from its effect on people?

I am not sure if anyone really knows this answer.  I certainly don't know my answer.  I feel like something should be done to reduce civilization's effect on the planet, but I am much more hesitant over actively doing something to reverse any effects climate change has had so far.  It is impossible to say whether the current ecosystem is better than a warmer one in the long-term, primarily because there is no good definition of "better".  I can say one is more diverse than the other, one is less affected by man than the other, but "better" has no meaning.  Just some food for thought.