Growing evidence demonstrates that climatic conditions can have a profound impact on the functioning of modern human societies, but effects on economic activity appear inconsistent. Fundamental productive elements of modern economies, such as workers and crops, exhibit highly non-linear responses to local temperature even in wealthy countries. In contrast, aggregate macroeconomic productivity of entire wealthy countries is reported not to respond to temperature= while poor countries respond only linearly. Resolving this conflict between micro and macro observations is critical to understanding the role of wealth in coupled human–natural systems and to anticipating the global impact of climate change. Here we unify these seemingly contradictory results by accounting for non-linearity at the macro scale. We show that overall economic productivity is non-linear in temperature for all countries, with productivity peaking at an annual average temperature of 13 °C and declining strongly at higher temperatures. The relationship is globally generalizable, unchanged since 1960, and apparent for agricultural and non-agricultural activity in both rich and poor countries. These results provide the first evidence that economic activity in all regions is coupled to the global climate and establish a new empirical foundation for modelling economic loss in response to climate change, with important implications. If future adaptation mimics past adaptation, unmitigated warming is expected to reshape the global economy by reducing average global incomes roughly 23% by 2100 and widening global income inequality, relative to scenarios without climate change. In contrast to prior estimates, expected global losses are approximately linear in global mean temperature, with median losses many times larger than leading models indicate.
New research finds that without climate change mitigation, even wealthy countries will see an economic downturn by 2100.
When thousands of scientists, economists and policymakers meet in Paris this December to negotiate an international climate treaty, one question will dominate conversations: what is the climate worth?
A new study published in the journal Nature shows that the global economy will take a harder hit from rising temperatures than previously thought, with incomes falling in most countries by the year 2100 if climate change continues unchecked. Rich countries may experience a brief economic uptick, but growth will drop off sharply after temperatures pass a critical heat threshold.
The study, co-led by Marshall Burke, a professor of Earth system science at Stanford's School of Earth, Energy & Environmental Sciences, provides a clear picture of how climate change will shape the global economy, which has been a critical missing piece for the international climate community leading up to the Paris talks. Understanding how much future climate change will cost in terms of global economic losses will help policymakers at the meetings decide how much to invest in emissions reductions today.
The work was co-authored by two researchers from the University of California, Berkeley: co-lead author Solomon Hsiang, the Chancellor's Associate Professor of Public Policy, and Edward Miguel, Oxfam Professor in Environmental and Resource Economics.
Heat threshold
"The data tell us that there are particular temperatures where we humans are really good at producing stuff," said Burke, who is also Center Fellow at the Freeman Spogli Institute for International Studies and fellow, by courtesy, at the Stanford Woods Institute for the Environment. "In countries that are normally quite cold - mostly wealthy northern countries - higher temperatures are associated with faster economic growth, but only to a point. After that point, growth declines rapidly.
That point, it turns out, is an annual average temperature of about 55 degrees Fahrenheit.
As average temperatures move past that mark, wealthy countries will start to see a drop-off in economic output. Poorer countries, mostly in the tropics, will suffer even steeper losses because they are already past the temperature threshold. This has the potential to widen the global inequality gap, said Burke.
A new approach
Looking at existing research, the team found a puzzling mismatch between micro-level studies, which show negative impacts of hot temperatures on output in specific sectors such as agriculture, and macro-level studies, which at least in rich countries show limited impacts on economic output.
"Many very careful studies show clearly that high temperatures are bad for things like agriculture and labor productivity, even in rich countries," Burke said. "While these relationships showed up again and again in the micro data – for example when looking at agricultural fields or manufacturing plants – they were not showing up in the existing macro-level studies, and we wanted to understand why."
The researchers suspected the problem was with the analysis, not the data, so they took a new approach.
Analyzing records from 166 countries over a 50-year period from 1960 to 2010, they compared each country's economic output in years of normal temperatures to that of unusually warm or unusually cool years. The data revealed a hill-shaped relationship between economic output and temperature, with output rising until the 55 F threshold and then falling faster and faster at higher temperatures. “Our macro-level results lined up nicely with the micro-level studies,” Hsiang said.
Two possible future. Colors are 2100 temperatures under “business as usual” climate change (left) and aggressive climate policy (right). This image shows a simulation of future nightlights, as seen from space, since richer economies tend to glow brighter. A hotter world is a more unequal world, with the north benefitting and tropical economies declining. A cooler world leads to more equitable global growth, offering regions like Africa the chance to “catch up”. Courtesy of Marshall Burke.
Two possible future. Colors are 2100 temperatures under “business as usual” climate change (left) and aggressive climate policy (right). This image shows a simulation of future nightlights, as seen from space, since richer economies tend to glow brighter. A hotter world is a more unequal world, with the north benefitting and tropical economies declining. A cooler world leads to more equitable global growth, offering regions like Africa the chance to “catch up”. Source: Burke, Hsiang and Miguel.
Higher temperatures, lower growth
The team then sought to understand what this historical pattern might mean for the future global economy as temperatures continue to warm.
“Many other researchers have projected economic impacts under future climate change,” Hsiang said. “But we feel our results improve our ability to anticipate how societies in coming decades might respond to warming temperatures.”
Projecting future changes in economic output under climate change was challenging.
“Even without climate change, there are a lot of possible ways in which the future economy might evolve,” Burke said. “We start with a few different baseline scenarios and then we bring in our historical understanding of the relationship between temperature and economic output to better understand how these economic trajectories might change with warming temperatures."
The researchers’ findings were stark.
In a scenario of unmitigated climate change, the team’s model shows that by 2100 the per-capita incomes of 77 percent of countries in the world would fall relative to current levels. By the team’s main estimate, global incomes could decline 23 percent by 2100, relative to a world without climate change. Other estimates are twice as high. The likelihood of global economic losses larger than 20 percent of current income is at least 40 percent, and much higher in some scenarios.
These estimates are substantially larger than existing models indicate, a difference the research team attributes to their updated and data-driven understanding of how countries have historically responded to temperature increases.
Rich countries not immune
A common assumption among researchers has been that wealth and technology protect rich countries from the economic impacts of climate change, because they use these resources to adapt to higher temperatures.
"Under this hypothesis, the impacts of future warming should lessen over time as more countries become richer," Burke said. "But we find limited evidence that this is the case."
Burke's team found that, historically, rich countries did not appear to respond any differently to temperature change than poor countries.
“The data definitely don’t provide strong evidence that rich countries are immune from the effects of hot temperatures,” said Hsiang. “Many rich countries just happen to have cooler average temperatures to start with, meaning that future warming will overall be less harmful than in poorer, hotter countries.”
Paris climate talks
From Nov. 30 to Dec. 11, France will host the 21st Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21/CMP11).
More than 40,000 delegates from national governments, private companies and civil society will meet in Paris to hash out an international agreement aimed at keeping global emissions low enough to prevent warming of more than two degrees Celsius.
On the table are three key issues: climate adaptation, mitigation and financing.
"We don't want to rule out that we could see unprecedented adaptation to hotter temperatures in the future, and we certainly hope we do see it," Burke said. "The historical evidence, though, suggests that this is not something we should count on."
The team says that mitigation, and how to pay for it, should be at the forefront of discussions in Paris.
"Our research is important for COP21 because it suggest that these economic damages could be much larger than current estimates indicate," said Burke. "What that means for policy is that we should be willing to spend a lot more on mitigation than we would otherwise. The benefits of action on mitigation are much greater than we thought, because the costs of inaction are much greater than we thought."
Note for reporters: The research team has created a website about their research results and methodology, including an interactive map showing country-by-country GDP projections through 2100 under a scenario of unmitigated climate change.
Frontiers in Food Policy: Perspectives on sub-Saharan Africa is a compilation of research stemming from the Global Food Policy and Food Security Symposium Series, hosted by the Center on Food Security and the Environment at Stanford University and funded by the Bill and Melinda Gates Foundation. The series, and this volume, have brought the world's leading policy experts in the fields of food and agricultural development together for a comprehensive dialogue on pro-poor growth and food security policy. Participants and contributing authors have addressed the major themes of hunger and rural poverty, agricultural productivity, resource and climate constraints on agriculture, and food and agriculture policy, with a focus on sub-Saharan Africa.
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Stanford Center on Food Security and the Environment
Soybean production has become a significant force for economic development in Brazil, but has come at the cost of expansion into non-protected forests in the Amazon and native savanna in the Cerrado. Over the past fifty years, production has increased from 26 million to 260 million tons. Area planted to soybeans has increased from roughly 1 million hectares in 1970 to more than 23 million hectares in 2010, second only to the United States.
A new study out of Stanford University examines the role of institutions and supply chain conditions in Brazil’s booming soybean industry and the relationship between soy yields and planted area. With the demand for soybeans projected to increase far into the future a better understanding of the economic and institutional factors influencing production can help policymakers better manage land use change.
Using county level data the researchers found that soy area and yields are higher in areas with high cooperative membership and credit levels, and where cheap credit sources are more accessible. Cooperatives help producers secure lower prices for inputs or higher prices for outputs through group purchases and sales. They also enable producers to store their grain past the harvesting period and sell it when prices are higher.
“This suggests that soybean production and profitability will increase as supply chain infrastructure improves in the Cerrado and Amazon,” said lead author Rachael Garrett, a PhD student in Stanford’s Emmett Interdisciplinary Program in Environment and Resources.
The authors did not find a significant relationship between land tenure and planted area or land tenure and yields. But found that yields decline and planted area actually increases as transportation costs increase. More importantly, the study showed counties with higher yields have a higher proportion of land planted in soy.
“Policies intending to spare land through technological yield improvements could actually lead to land expansion in the absence of strong land use regulations if demand and per hectare profits are high,” said co-author Rosamond L. Naylor, director of Stanford’s Center on Food Security and the Environment.
The current Forest Code requires rural land users in the Amazon to conserve 80% of their property in a ‘Legal Reserve’, and landowners in the Cerrado to conserve 20%. Historically, illegal clearings have been common and enforcement of the Legal Reserve requirements remains poor.
While this study focuses on Brazil, the results underscore the importance of understanding how supply chains influence land use associated with cash crops in other countries. Future demand for soybeans, as well as for cash crops like Indonesian palm oil, will continue to grow as demand for cooking oil, livestock feed, and biodiesel increase with income growth and changing dietary preferences in emerging economies.
In advance of the third presidential debate, Freeman Spogli Institute center directors thought about key international policy issues that need addressing by presidential candidates Barak Obama and Mitt Romney. FSE center director Rosamond L. Naylor posed the question below among a list of other suggested FSI foreign policy questions to debate:
Should our government help American farmers cope with climate impacts on food production, and should this assistance be extended to other countries – particularly poor countries – whose food production is also threatened by climate variability and climate change?
What to listen for: Most representatives in Congress would like to eliminate government handouts, and many would also like to turn away from any discussion of climate change. Yet this year, U.S. taxpayers are set to pay up to $20 billion to farmers for crop insurance after extreme drought and heat conditions damaged yields in the Midwest.
With the 2012 farm bill stalled in Congress, the candidates need to be clear about whether they support government subsidized crop insurance for American farmers. They should also articulate their views on climate threats to food production in the U.S. and abroad.
Without a substantial crop insurance program, American farmers will face serious risks of income losses and loan defaults. And without foreign assistance for climate adaptation, the number of people going hungry could well exceed 15 percent of the world's population.
~Rosamond L. Naylor, director of the Center on Food Security and the Environment
Inspired by the spirit of debate, FSE fellows took the opportunity to pose a few additional questions for the candidates.
The US now uses more that 40% of its corn crop for biofuel. While some argue this contributes to long-term energy independence, others note that ethanol mandates, along with unfavorable weather, can contribute to higher and more volatile food prices like those seen in recent years. Do you regard the US policy emphasis on biofuels, especially corn-based ethanol, as being a successful program to date? Have the benefits from biofuels outweighed the negative impacts on higher food costs around the world, and do you believe that mandates continue to be the most appropriate policy going forward?
One of the largest agricultural programs in the US is in the form of food stamps to poor consumers. Would you prefer to cap, perhaps even eliminate, the food stamp (SNAP) program? Would you prefer to replace it with a direct cash transfer system? Whom do you think generally should qualify either for food stamps or cash transfers?
Questions from FSE associate director David Lobell:
A major initiative of the Obama Administration has been Feed the Future, which aims at improving food security in other countries. Is the U.S. focused sufficiently on hunger in other parts of the world? Have actions matched rhetoric? Is a $3 billion expenditure on this initiative the right sum in an era of large fiscal deficits in the U.S.?
The United States is viewed by many as a world leader, but its role in foreign assistance is contentious. In dollar terms, the United States consistently gives more foreign assistance than any other donor nation. In 2012, for example, the U.S. provided nearly 34 billion dollars, or more than twice as much as any other country. On the other hand, many criticize the U.S. for contributing relatively little in comparison to other countries when donations are measured as a share of GDP.Some also point out that much of what is labeled foreign assistance is actually military or security assistance, and does not contribute directly towards economic development.Does the U.S. spend too little or too much on foreign assistance, and should a greater proportion of U.S. funding go directly towards poverty reduction and food security?
Paul Collier will talk about how to manage the difference between helpful and damaging commercialisation, and puts forth three arguments. First, we need to face the tough reality that African food production has failed to keep pace with demand over the course of several decades, suggesting that there is a deep problem with respect to innovation and investment given the way African agriculture has been organised. Second, we need to accept that climate change, population growth, and income gains from natural resources will all stress this imbalance further: the prospect is for widening food deficits with business as usual. Third, two major changes are afoot. Globally, the model of commercial tropical agriculture pioneered in Brazil has demonstrated that output can be raised very substantially by changing the mode of organisation. Africa is now starting to open land markets to large foreign management. Superficially this looks like Brazil2, but it may instead be a wave of speculative acquisitions triggered by the price peaks of 2008.
Collier is the Director of the Centre for the Study of African Economies and Professor of Economics and Public Policy at the Blavatnik School of Government, Oxford University. He is currently Advisor to the Strategy and Policy Department of the IMF, advisor to the Africa Region of the World Bank; and he has advised the British Government on its recent White Paper on economic development policy. He has been writing a monthly column for the Independent, and also writes for the New York Times, the Financial Times, the Wall Street Journal, and the Washington Post. His research covers the causes and consequences of civil war; the effects of aid and the problems of democracy in low-income and natural-resources rich societies.
Derek Byerlee's talk will lay out a number of models of inclusive agribusiness growth, grouped into three categories (i) institutional arrangements for improving productivity of smallholders operating in spot markets, (ii) various types of contract farming arrangements, and (iii) large-scale farms that generate jobs and/or include community equity shares. The institutional and policy context as well as commodity characteristics that favor these models are discussed within a simple transactions cost framework. He will also discuss cross-cutting policy priorities to enable the growth of commercial agriculture and agribusiness. These include continuing reforms to liberalize product and input markets, access to technology and skills, stimulating financial and risks markets, securing land rights, and investment in infrastructure through public-private partnerships.
Byerlee has dedicated his career to agriculture in developing countries, as a teacher, researcher, administrator and policy advisor. He has lived and worked for a total of 20 years in the three major developing regions-Africa, Asia, and Latin America. After beginning in academia at Michigan State University, he spent the bulk of his career at the International Maize and Wheat Improvement Center (CIMMYT). There as a economist and research manager he made notable contributions in forging a new spirit of collaboration between scientists, economists and farmers. He also published widely on efficiency of research systems, spillovers, and sustaining productivity in post green revolution agriculture. After joining the World Bank in 1994, he has applied his experience of research systems to finding innovative approaches to funding and organizing agricultural research, including emerging challenges in biotechnology policy. Since 2003, he has provided strategic direction and led policy world for the agricultural and rural sector in the World Bank.
For decades, earnings from farming in many developing countries, including in sub-Saharan Africa, have been depressed by a pro-urban bias in own-country policies, as well as by governments of richer countries favouring their farmers with import barriers and subsidies. Both sets of policies reduced global economic welfare and agricultural trade, and almost certainly added to global inequality and poverty and to food insecurity in many low-income countries. Progress has been made over the past three decades in reducing the trend levels of agricultural protection in high-income countries and of agricultural disincentives in African and other developing countries. However, there is a propensity for governments to insulate their domestic food market from fluctuations in international prices, and that has not waned. That action amplifies international food price fluctuations, yet when both food-importing and food-exporting countries so engage in insulating behaviour, it does little to advance their national food security. Anderson argues much scope remains to improve economic welfare and reduce poverty and food insecurity by removing trade distortions. He summarizes indicators of these trends and fluctuations in trade barriers before pointing to changes in both border policies and complementary domestic measures that together could improve African food security.
Kym Anderson is the George Gollin Professor of Economics, foundation Executive Director of the Wine Economics Research Centre, and formerly foundation Executive Director of the Centre for International Economic Studies at the University of Adelaide, where he has been affiliated since 1984. His also a Professor of Economics, Arndt-Corden Dept of Economics, Australian National University, Canberra. His research interests and publications are in the areas of international trade and development, agricultural economics, environmental economics, and wine economics. His most recent projects have focused on empirical analysis of such issues as the Doha Development Agenda of the World Trade Organization;global distortions to agricultural incentives;economics of agricultural biotechnology (GMO) policies globally; and wine globalization.
Johann Swinnen (commentator). Johan Swinnen is Professor of Development Economics and Director of LICOS Center for Institutions and Economic Performance at the University of Leuven (KUL) in Belgium. He is also Senior Research Fellow at the Centre for European Policy Studies (CEPS), Brussels, where he directs the programme on EU agricultural and rural policy. From 2003 to 2004 he was Lead Economist at the World Bank and from 1998 to 2001 Economic Advisor at the European Commission.
Kym Anderson
George Gollin Professor of Economics, School of Economics, University of Adelaide; Professor of Economics, Arndt-Corden Dept of Economics, Australian National University, Canberra
Speaker
Johan Swinnen is Professor of Development Economics and Director of LICOS Center for Institutions and Economic Performance at the University of Leuven (KUL) in Belgium. He is also Senior Research Fellow at the Centre for European Policy Studies (CEPS), Brussels, where he directs the programme on EU agricultural and rural policy. From 2003 to 2004 he was Lead Economist at the World Bank and from 1998 to 2001 Economic Advisor at the European Commission.
He is a regular consultant for these organizations and for the OECD, FAO, the EBRD, and several governments and was coordinator of several international research networks on food policy, institutional reforms, and economic development. He is President—Elect of the International Association of Agricultural Economists and a Fellow of the European Association of Agricultural Economists. He holds a Ph.D from Cornell University.
His research focuses on institutional reform and development, globalization and international integration, media economics, and agriculture and food policy. His latest books are “Political Power and Economic Policy” (Cambridge Univ Press), “The Perfect Storm: The Political Economy of the Reform of the Common Agricultural Policy” (CEPS), “Global Supply Chains, Standards, and the Poor” (CABI), “Distortions to Agricultural Incentives in the Transition Economies of Europe and Central Asia” (World Bank Publications), and “From Marx and Mao to the Market” (Oxford University Press -- and Chinese translation by Beijing University Press). He is the president of The Beeronomics Society and editor of the book “The Economics of Beer” (Oxford Univ Press).
Commentator
Symposiums
Global Food Policy and Food Security Symposium Series
Soybean production has become a significant force for economic development in Brazil. It has also received considerable attention from environmental and social non-governmental organizations as a driver of deforestation and land consolidation. While many researchers have examined the impacts of soybean production on human and environmental landscapes, there has been little investigation into the economic and institutional context of Brazilian soybean production or the relationship between soy yields and planted area. This study examines the influence of land tenure, land use policy, cooperatives, and credit access on soy production in Brazil. Using county level data we provide statistical evidence that soy planted area and yields are higher in regions where cooperative membership and credit levels are high, and cheap credit sources are more accessible. This result suggests that soybean production and profitability will increase as supply chain infrastructure improves in the Cerrado and Amazon biomes in Brazil. The yields of competing land uses, wheat, coffee, and cattle production and a complementary use, corn production, also help to determine the location of soybean planted area in Brazil. We do not find a significant relationship between land tenure and planted area or land tenure and yields. Soy yields decline as transportation costs increase, but planted area as a proportion of arable land is highest in some of the areas with very high transportation costs. In particular, counties located within Mato Grosso and counties within the Amazon biome have a larger proportion of their arable, legally available land planted in soy than counties outside of the biome. Finally, we provide evidence that soy yields are positively associated with planted area, implying that policies intending to spare land through yield improvements could actually lead to land expansion in the absence of strong land use regulations. While this study focuses on Brazil, the results underscore the importance of understanding how supply chains influence land use associated with cash crops in other countries.
Seafood plays a critical role in global food security and protein intake. The global supply of seafood increasingly comes from aquaculture - the farming of fish, shellfish, and aquatic plants. China is the dominant leader in this field, supplying about two-thirds of global aquaculture production. China also consumes an estimated one-third of global aquaculture output, a figure that is expected to increase as the country proceeds along its developmental trajectory.
Two possible future. Colors are 2100 temperatures under “business as usual” climate change (left) and aggressive climate policy (right). This image shows a simulation of future nightlights, as seen from space, since richer economies tend to glow brighter. A hotter world is a more unequal world, with the north benefitting and tropical economies declining. A cooler world leads to more equitable global growth, offering regions like Africa the chance to “catch up”. Courtesy of Marshall Burke.
“This suggests that soybean production and profitability will increase as supply chain infrastructure improves in the Cerrado and Amazon,” said lead author