You’ve probably heard this before: Without stricter climate policies, global temperatures will most likely increase by a little over 3 degrees by the end of the century. But then there’s research suggesting that this would only result in a couple of percentage points lower GDP than today. And with just a bit of economic growth, those lost GDP percentages would be quickly recovered.

This kind of research typically relies on what are called integrated assessment models (IAMs). The first model of this kind was developed by the American economist William Nordhaus. He later won the Nobel Memorial Prize in Economic Sciences for developing the method—not because the model is particularly accurate. In fact, it isn’t, and many leading economists are highly critical of how this and other such models are used in both research and the climate debate.

A conversation with:

Marshall Burke associate professor at the Stanford Doerr School of Sustainability, and Deputy Director of the Center on Food Security and the Environment at Stanford University.

There are, however, alternative methods. For example, one can use historical data combined with national climate projections and socioeconomic scenarios to estimate future damages. We spoke with Marshall Burke, another American economist, who, along with colleagues, has previously analyzed how temperature changes affect economic growth using data from 165 countries between 1960 and 2010.

They found that higher temperatures slow economic growth, especially in warmer regions. And for poorer countries in particular, there are significant economic benefits if we manage to limit warming to 1.5°C compared to 2°C. In other words, Burke and his colleagues have measured the effects and costs of climate policy against the effects and costs of doing nothing. There is, of course, variation from country to country, he explains, but:

Marshall Burke: – Globally, there’s just no question—the data are very clear: Hotter temperatures reduce global economic output, and that impact is going to get larger over time. We, and many others, find—and now think the data very strongly support—an effect of temperature on economic growth rates. So hotter temperatures reduce how quickly economies grow, and that’s fundamental for long-term GDP. Even small impacts on your growth rate can, over a lot of years, have a very large impact on total economic output.

We think that historical data strongly supports the effect of temperature on economic growth. If you take that seriously and you run the world forward, the world will be substantially poorer in the future with climate change than it would have been without it.

This is an important point that is sometimes lost in the debate: what we are comparing to what. Often people will say things like, “Oh, climate change is going to make all of us destitute,” but that’s mostly not what we find. We find that the world is likely to continue to grow, but it’s going to grow much more slowly in a warming world than in a non-warming world. And when you compare those two worlds, the difference is pretty big in terms of GDP. Fifty years out, or 100 years out, that difference is really large. It’s trillions and trillions of dollars that we could have had as income or consumption that are just taken off the ledger due to climate change.

– No need to evoke the tipping point boogeyman

<2°C: – But then in the IPCC 1.5-degree report, just after they’ve referred to your numbers, it says that “Under the no-policy baseline scenario, temperature rises by 3.66°C by 2100, resulting in a global gross domestic product (GDP) loss of 2.6%”. Now, that does not sound like a lot. And denialists say growth will probably eat those measly lost percentage points up anyway, so, just bring on the heat! So who should we believe? You, or whoever came up with that 2.6% number?

– I am honestly not sure where they got that number – perhaps from much older work that was honestly educated guesswork. But a host of more recent studies that are grounded in a lot of data and better methodologies suggest that global impacts are likely at least 5-10x larger.

– We have to talk about risk here too. Some of the critique against integrated assessment models (IAMs) is that they don’t allow for climate tipping point risks—low probability, high impact events. And yet, part of the argument for inaction, when interpreting the results, is that they happily neglect these risks, and still, they seemingly overstate the risks of “costly” climate policy not having intended effects. Anyway – in your analysis, based on historical data, how can you factor in these types of risks?

– I agree with everything you said, but our work suggests that you don’t even need invoke the boogeyman of tipping points to reach the conclusion that we should care about climate change and do something about it. You don’t need these types of extreme outcomes to motivate ambitious climate policy. Or to say that unabated climate change is going to generate a lot of damage. Doing reasonable things to reduce emissions is going to generate a lot of benefits anyway. If you add tipping points on top of that, then that argument just gets stronger.

Immediate economic and health benefits

– But if the major benefits are all the bad stuff that is not going to happen in the future, but we still have to pay now… that is kind of a hard sell, isn’t it?

– That is true, there’s a temporal trade-off that’s important. Certainly, these transitions are costly, but they generate benefits in the future in terms of avoided impacts. And again, our numbers say those impacts are large. But people should also recognize that you get lots of benefits right away in most parts of the world from reducing emissions.

– Like, for instance?

– Like reduced air pollution. In parts of the US, for instance, we still use pretty dirty sources of energy that release CO₂, but they also release other air pollutants. If we transition away from those, we get another stream of immediate health and economic benefits. We don’t have to wait 50 or 100 years. In fact, estimates suggest that those immediate benefits could be as large as the climate benefits you get 50 years from now, just because cleaner air is a massive public health and economic benefit.

– These types of arguments, that “oh, we won’t be able to fulfil our climate goals, it will be too expensive, and anyway, it doesn’t matter because climate change isn’t all that bad” … do they sound familiar? Do you hear similar points being made in the USA from those opposed to more ambitious climate policy?

– Absolutely. The talking points on climate change have changed a lot even in the last five years. I teach a class on this to undergraduates, and I used to start the class by showing clips of politicians making denialist claims like, “We don’t know if the climate is changing.” It switched from that to, “We know it’s changing, but we don’t really know the cause; we need more research.”

Now you don’t really hear that anymore. Now it’s, “We know climate is changing, human emissions are certainly a cause, but doing something about it is just going to be too costly.” It’s the “It doesn’t make sense to take ambitious action” argument.

Talking point progress

– So the basic denial remains, but the talking points change.

– But I view that as progress—we’re getting closer to the right answer here, and the distribution of costs versus benefits is certainly a point that can be debated. In my view, the science supports very ambitious action and suggests that if we don’t do something, the costs are going to be dramatically large. There are many things we can do where the benefits will substantially exceed the costs of the transition.

That’s not to say we should completely eliminate emissions right away—that would be prohibitively costly and probably shut down our economies. But we need to figure out how to do it over the next few decades. We need to get to net zero, and we can do that. There’s a lot of great research showing how we can do that. We’re not going to do it right away—that would be too costly—but it will take us a couple of decades to do it in a cost-effective way. And all the science suggests that’s possible.

– And there you also have the modern denialists’ favorite strawman: “We can’t shut down the oil industry tomorrow, that would break our economy. So let’s do nothing.”

– It’s funny, the talking point is often about how costly these transitions are, and if you tried to do it all at once, it would be too expensive and economically damaging. I’m sympathetic to that nugget of the talking point, but I think it misses the big picture on how large the damages would be if we don’t act, and that we have a lot of cost-effective options over the next few decades.