From crop damage to cooling failures at cloud-based data centers, climate change affects a wide variety of economic sectors. It’s unclear whether a country’s economy can bounce back each year from these impacts or if global temperature increases cause permanent and cumulative impacts on the market economy. A study from the University of California, Davis, published today by IOP Publishing in the journal Environmental Research Letters, addresses this fundamental question, which underlies the costs and benefits of climate change policy. The research uses an empirical approach to revisit the effect of rising global temperatures and climate change on gross domestic product, or GDP.
The study found that economies are sensitive to persistent temperature shocks over at least a 10-year time frame. It also found that climate change impacts economic growth in about 22% percent of the countries analyzed.
“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 contradicts 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.”
A dry creek bed in California’s Central Valley during the 2014 drought. The region is again experiencing intense drought. A UC Davis study shows that economic impacts of global temperature shocks can have lasting impacts on the market. (Gregory Urquiaga/UC Davis)
Persistent and cumulative
Previous research examined the question by estimating the delayed effect of temperature on GDP in subsequent years, but the results were inconclusive. With this study, UC Davis scientists and co-authors from the European Institute on Economics and the Environment in Ital …