This article is part of the World Economic Forum Annual Meeting.

Twelve-year-old Lena is growing up poor and malnourished on Chicago’s West Side. She buys Blue Juice and Hot Chips from the corner store on her way to school. She and her classmates can afford the flavoured sugar water and salty starch, but this cheap “food” that fills up her stomach provides no nutritional value. 

Stanford scientists found that the global economy is likely to benefit from ambitious global warming limits agreed to in the United Nations Paris Agreement.

Failing to meet climate mitigation goals laid out in the U.N. Paris Agreement could cost the global economy tens of trillions of dollars over the next century, according to new Stanford research. The study, published in Nature, is one of the first to quantify the economic benefits of limiting global warming to levels set in the accord.

The agreement commits 195 countries to the goal of holding this century’s average temperature to 2 degrees Celsius above levels in the pre-industrial era. It also includes an aspirational goal of pursuing an even more stringent target of limiting temperature rise to 1.5 degrees. To date, the economic benefits of achieving these temperature targets have not been well understood.

 “Over the past century we have already experienced a 1-degree increase in global temperature, so achieving the ambitious targets laid out in the Paris Agreement will not be easy or cheap. We need a clear understanding of how much economic benefit we’re going to get from meeting these different targets,” said Marshall Burke, assistant professor of Earth system science in the School of Earth, Energy & Environmental Sciencesand lead author of the study.

To develop this understanding, a team of Stanford researchers studied how economic performance over the past half-century correlated with changes in temperature around the world. Then, using climate model projections of how temperatures could change in the future, they calculated how overall economic output is likely to change as temperatures warm to different levels.

The researchers found a large majority of countries – containing close to 90 percent of the world’s population – benefit economically from limiting global warming to 1.5 degrees instead of 2 degrees. This includes the United States, China and Japan – the three largest economies in the world. It is also true in some of the world’s poorest regions, where even small reductions in future warming generate a notable increase in per capita gross domestic product.

“The countries likely to benefit the most are already relatively hot today,” said Burke. “The historical record tells us that additional warming will be very harmful to these countries’ economies, and so even small reductions in future warming could have large benefits for most countries.”

The projected costs from higher temperatures come from factors such as increases in spending to deal with extreme events, lower agricultural productivity and worse health, the scientists said.

Previous research has shown that the actual climate commitments each country has made as part of the Paris Agreement add up to close to 3 degrees of global warming, instead of the 1.5–2 degrees warming goals.

Given this discrepancy, the researchers also calculated the economic consequences of countries meeting their individual Paris commitments, but failing to meet the overall global warming goals of 1.5–2 degrees. They found that failing to achieve the 1.5–2 degrees goals is likely to substantially reduce global economic growth.

Percentage gain in GDP per capita in 2100 from achieving 1.5 degrees Celsius global warming instead of 2 degrees.

Percentage gain in GDP per capita in 2100 from achieving 1.5 degrees Celsius global warming instead of 2 degrees. (Image credit: Marshall Burke)

“It is clear from our analysis that achieving the more ambitious Paris goals is highly likely to benefit most countries – and the global economy overall – by avoiding more severe economic damages,” said Noah Diffenbaugh, professor of Earth system science and paper co-author.

The authors note the study may underestimate the total costs of higher levels of global warming. That’s especially true if catastrophic changes such as rapid melting of the ice on Greenland or Antarctica come to pass, or if extreme weather events such as heatwaves and floods intensify well beyond the range seen in historical observations. A recent studyby Diffenbaugh and his colleagues showed that even with reduced levels of global warming, unprecedented extreme events are likely to become more prevalent.

The new research helps shed light on the overall economic value of the Paris Agreement, as well as on the Trump administration’s decision to withdraw the U.S. from the accord because of concerns that it is too costly to the U.S. economy. The researchers calculated that the overall global benefits of keeping future temperature increases to 1.5 degrees are likely in the tens of trillions of dollars, with substantial likely benefits in the U.S. as well. They note that these benefits are more than 30 times greater than the most recent estimates of what it will cost to achieve the more ambitious 1.5 degrees goal.

“For most countries in the world, including the U.S., we find strong evidence that the benefits of achieving the ambitious Paris targets are likely to vastly outweigh the costs,” said Burke.

Burke is also a fellow at the Center on Food Security and the Environment, the Stanford Woods Institute for the Environmentand the Freeman Spogli Institute for International Studies. Diffenbaugh is also the Kara J Foundation Professor, the Kimmelman Family Senior Fellow in the Stanford Woods Institute for the Environment and an affiliate of the Precourt Institute for Energy. Additional co-authors include W. Matt Davis, a former researcher at the Center on Food Security and the Environment. The research was supported by the Erol Foundation.

Media Contacts

Marshall Burke, School of Earth, Energy & Environmental Sciences: mburke@stanford.edu, (650) 721-2203
Noah Diffenbaugh, School of Earth, Energy & Environmental Sciences: diffenbaugh@stanford.edu, (650) 223-9425
Michelle Horton, Center on Food Security and the Environment: mjhorton@stanford.edu, (650) 498-4129

Gaps in social science knowledge of climate change constrain the policy impact of natural science research, a Stanford team argues.

Scientists have made huge strides in understanding the physical and biological dimensions of climate change, from deciphering why climate has changed in the past to predicting how it might change in the future.

As the body of knowledge on the physical science of climate grows, a missing link is emerging: What are the economic and social consequences of changes in the climate and efforts to control emissions of greenhouse gases?

In a new paper in the journal Science, a team led by Stanford professors Charles Kolstad and Marshall Burkeargues that relatively low funding for social science research has contributed to a knowledge gap about what climate change means for human society. This knowledge gap, they argue, renders the large advances in natural science less useful than they could be for policymakers.

The paper highlights three research questions with the greatest potential to close that gap:

What is the true cost of carbon emissions?

The social cost of carbon (SCC) is a dollar value estimate of future social and economic damages caused by each present-day metric ton of carbon emissions. It can also be thought of as the amount of money society saves, in terms of damage avoided, by not emitting an additional metric ton of carbon.

"The SCC is a key policy measurement that's already being used in U.S. government regulations. But existing estimates have shortcomings and these need fixing if we are going to make the correct policy decisions around climate change," said Burke, an assistant professor at Stanford School of Earth, Energy and Environmental Sciences, a center fellow at the Freeman Spogli Institute for International Studies and a faculty fellow at the Stanford Institute for Economic Policy Research.

Current SCC calculations leave out several important factors. For example, what is the economic cost of extreme climate events such as floods and droughts? How should economists estimate "non-market" damages that are exacerbated by climate change, such as armed conflict, disease epidemics and deforestation? In what parts of the world does climate change slow or accelerate economic growth? Can farmers avoid lost income from climate change by adapting their crop choices and planting schedules?

"Getting the social cost of carbon right is most pressing, given its importance to policy," said Kolstad, a senior fellow at the Stanford Institute for Economic Policy Research and at the Precourt Institute for Energy. "It's also an area where rapid research progress should be possible."

What emissions mitigation policies are best?

Once researchers agree on the true cost of carbon, there are many policy options for reducing emissions. Industry regulations and subsidies for renewable energy are popular policy choices for governments all over the world, but they may be weaker at cutting emissions than less politically popular options like carbon pricing or tradeable carbon emission permits.

"Until we understand more about the benefits and tradeoffs of different carbon pricing options, governments are almost flying blind on climate mitigation policy," Kolstad said. "When we can make a clear economic case for one policy over the other, we can better align decisions about carbon pricing systems with their actual costs and benefits and, as a result, strengthen political support for action." 

What role do developing countries play?

Most of the existing research on climate economics tends to focus on wealthy countries, even though developing countries now contribute more total greenhouse gas emissions. Poorer countries also often face a different policy environment than richer countries and are potentially more economically vulnerable to changes in climate.

"We need better evidence on how impacts of climate change might differ in developing countries, as well as a deeper understanding of the climate policy choices faced by developing country governments," Burke said.

Twenty-eight leading economists contributed to the Science paper, a fact that Burke pointed to as evidence of broad consensus on the need for more economic research on climate change.

The biggest roadblock, the authors agree, is funding.

"The research problems are tough for both natural scientists and economists, but research support has been much more modest in economics, so far fewer people are working in the area and progress has been slower," Kolstad said.

"Dozens of teams of physical scientists around the world work with the exact same climate simulations and compare results to estimate future climate change," Burke said.  "Economists are just starting to do something similar, and as this collaboration develops I think it will be immensely valuable. There's a strong argument for spending research dollars on understanding the economic and social implications of that physical science. Social science is relatively cheap, so extra funding can go a long way."

Kolstad encourages young researchers to pursue the "many interesting, socially relevant questions in this field" and advises governments to work together to strengthen long-term research funding and support for graduate students and postdoctoral researchers. "Otherwise," he said, "the large sums spent on natural science will be poorly targeted."

CONTACT:

Charles Kolstad, SIEPR: ckolstad@stanford.edu, (650) 721-1663

Marshall Burke, Earth System Science: mburke@stanford.edu, (650) 721-2203

Laura Seaman, Food Security and the Environment: lseaman@stanford.edu, (650) 723-4920