🌡 Is the economic impact from climate change way worse than we think?

Maybe. But if so, then we should be pushing even harder for clean energy abundance, right? Right? Hello? ⚡⚛☀🌋

Quote of the Issue

“It seems to us that recognition of the fact that today's problems arise, not from centuries of human failure and rapaciousness but as the result of extraordinary and multiple successes in attaining the goals mankind has cherished most is bound to have a positive and healthy effect on social morale.” - Herman Kahn

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The Conservative Futurist: How To Create the Sci-Fi World We Were Promised

“With groundbreaking ideas and sharp analysis, Pethokoukis provides a detailed roadmap to a fantastic future filled with incredible progress and prosperity that is both optimistic and realistic.”

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The Essay

Super-Short Summary: In a new NBER working paper, economists Adrien Bilal and Diego R. Känzig estimate that climate change could cause a staggering one-third or more loss in long-term human welfare. Their novel approach, analyzing global average temperature changes, predicts higher economic damage than previous studies. The economists argue that unilateral decarbonization policies could be cost-effective for large countries like the US. But I question if the scary numbers now mean environmentalists will support permitting reforms, nuclear energy, and AI's potential for clean energy innovation.

🌡 Is the economic impact from climate change way worse than we think?

Even in an age of when climate alarmism is everywhere, I might not read a more alarming study this year about the impacts of a warming Earth. In the new NBER working paper “The Macroeconomic Impact of Climate Change: Global vs. Local Temperature,” economists Adrien Bilal (Harvard University) and Diego R. Känzig (Northwestern University) find that the negative impacts of climate change on the global economy are about six times larger than previous research had estimated. 

I mean, not great. Under a "business-as-usual" scenario where emissions continue unchecked, the Bilal-Känzig model predicts climate change will cause a 31 percent loss in long-term human welfare — equivalent to losing nearly a third of consumption forever — that grows to nearly 52 percent by 2100. (“These magnitudes are comparable to the economic damage caused by fighting a war domestically and permanently.”)

Now that's far worse than economists previously thought. Especially worrisome: Small temperature changes cause big economic impacts. Bilal and Känzig show that if global temperatures rise by just under 1°C (1.8°F), it could cause a staggering 12 percent drop in world economic output. 

The economists also offer this fun counterfactual: “Our results also indicate that world GDP per capita would be 37% higher today had no warming occurred between 1960 and 2019 instead of the 0.75°C observed increase in global mean temperature.”