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.

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A Global Perspective on Food Policy

I applaud Mark Bittman, Michael Pollan, Ricardo Salvador, and Olivier de Schutter for advocating the introduction of a national food policy in the U.S. Greater emphasis in our current farm legislation on nutrition, health, equity, and the environment is clearly warranted and long overdue. As the authors note, Americans’ access to adequate nutrition at all income levels affects educational and health outcomes for the nation as a whole. Poor nutrition thus plays a role in determining the level and distribution of economic and social wellbeing in the U.S, now and in the future. It is surprising that no one within the large circle of Presidential hopefuls has raised the topic of food, not just agriculture, as a major political issue for the 2016 election.

The U.S. is not unique. Virtually every country with an agrarian base has, at some point in history, introduced agricultural policies that support farmers and provide incentives for them to produce major commodities. At the time, governments have been able to justify these policies on several grounds: national security (avoiding excess dependence on foreign nations for food), economic growth (using agricultural surpluses as an engine of economic growth), and social stability (keeping its population well-fed to avoid social unrest). Once agricultural policies are implemented, they typically give rise to institutions and vested political interests that perpetuate a supply-side orientation to food and agriculture. In the U.S., the political institutions that govern food and agriculture have their roots in historical political precedents that date back to the 1860s, and later to the 1930s when the New Deal was promulgated. Farm interests have been entrenched in the U.S. political system for quite some time, and they cannot be easily removed.

There is a general rule for successful policies: Align incentives with objectives. A corollary to this principle is that objectives change over the course of economic development. For the United States in earlier eras, and for many developing economies in recent decades, meeting basic calorie needs has been the first order of business. This objective has been largely achieved through public investments in infrastructure (irrigation, roads), research and development, commodity support programs, incentives for private agribusiness development, and other supply-side measures.

With successful agricultural growth and rising incomes, many countries face a new set of food and nutrition challenges: eliminating “hidden hunger” (deficiencies in iron, vitamin A, calcium, zinc and other micronutrients), and abating the steady rise in obesity that results from a transition to diets rich in energy-dense carbohydrates, fats, and sugar. Hidden hunger affects some three billion people worldwide. It is prevalent among low-income households in almost all countries, impairs cognitive and physical development (especially among infants up to two years of age) and thus limits a nation’s educational and economic potential. Meanwhile, rates of obesity now surpass rates of energy-deficient hunger throughout the world, even in developing nations.

The objectives of food and agricultural policies in virtually all countries need to shift, on balance, from promoting staple food supplies to enhancing nutrition. I am not suggesting an abandonment of agriculture, but rather an enrichment of agriculture with more crop diversity to support the nutritional needs of all people. If improved nutrition is the objective, what are the correct incentives? Proper incentives will differ among countries, but will inevitably require a fundamental change in institutional structure. With a shift from supply- to demand orientation, there needs to be a transition from Ministries of Agriculture to Ministries of Food. After all, the main goals of a Ministry of Agriculture are to increase the volume of agricultural production and to improve economic growth in the agricultural sector. The main goal of a Ministry of Food, by contrast, is to enhance the nutrition and food security of the entire population.

Bittman, Pollan, Salvador, and de Schutter emphasize that replacing the U.S. Department of Agriculture (USDA) with a “U.S. Department of Food, Health, and Wellbeing” would be difficult at best. It would require unprecedented political will and cooperation among parties. The same can be said for institutional change in agricultural ministries throughout the world. Regardless of the challenges, however, nothing will change until the conversation surrounding food policies, politics, and institutions takes a major turn.

FSE director Roz Naylor will give the opening plenary lecture at the 2nd International Conference on Global Food Security on October 12, 2015 at Cornell University. Naylor is William Wrigley Professor in Earth System Science, and senior fellow at the Stanford Woods Institute for the Environment and the Freeman Spogli Institute for International Studies at Stanford. 

In addition to Naylor's lecture on "Food security in a commodity-driven world," several FSE researchers will give talks and poster sessions during the five-day conference, including professors Marshall Burke and Eric Lambin, visiting scholar Jennifer Burney, postdoctoral scholar Meha Jain, and doctoral candidate Elsa Ordway.

Bad weather in sub-Saharan Africa increases the spread of HIV, according to a study published in the June 2015 issue of the Economic Journal, co-authored by Stanford professor and FSE fellow Marshall Burke.

When the rains fail, farmers in rural areas often see their incomes fall dramatically and will try to make up for it however they can, including through sex work. Analysing data on more than 200,000 individuals across 19 African countries, the research team finds that by changing sexual behaviour, a year of very low rainfall can increase local infection rates by more than 10%.

The results have important policy implications for fighting the spread of the epidemic, as co-author Erick Gong of Middlebury College notes:

‘Existing approaches to stopping the spread of HIV – such as promoting condom use and the use of anti-retrovirals – remain critically important. But our results suggest that other policy approaches could be very useful too – in particular, approaches that provide safety nets to rural households when the weather turns bad.’

Policies and investments seemingly unrelated to HIV – such as the promotion of rural insurance or household savings schemes, or the development of drought-tolerant crops – might have surprising benefits in slowing the HIV epidemic. Co-author Kelly Jones of the International Food Policy Research Institute says:

‘The HIV/AIDS epidemic remains one of the world’s greatest health challenges, with over a million new infections per year in Africa alone. Our results expand the menu of options for addressing the epidemic, and highlight some surprising options that are not at the forefront of people’s minds.’

The research sheds valuable light on why HIV continues to spread in Africa. Previous studies have documented in limited settings that poor women often alter their sexual behaviour in response to an income shortfall. But until now, there has been little evidence that this response is big enough to affect the trajectory of the HIV epidemic.

To fill this gap, the researchers combined data on the HIV status of thousands of people across sub-Saharan Africa with data on the recent rainfall history in each individual’s location.

Because years of low rainfall can lead to much lower incomes in these locations, particularly in rural areas where people depend more heavily on agriculture for their livelihoods, variation in rainfall provides a way to study how changes in local economic conditions affect infection rates. Co-author Marshall Burke comments:

‘We were surprised by how strong the relationship is between recent rainfall fluctuations and local infection rates. As expected, the relationship is much stronger in rural areas, and particularly for women who report working in agriculture. These are the people who really suffer when the rains fail, and who are forced to turn to more desperate measures to make ends meet.’

Notes for editors: ‘Income Shocks and HIV in Africa’ by Marshall Burke, Erick Gong and Kelly Jones is published in the June 2015 issue of the Economic Journal.

Marshall Burke is an assistant professor of Earth System Science at Stanford University. Erick Gong is an assistant professor of economics at Middlebury College. Kelly Jones is a research fellow at the International Food Policy Research Institute (IFPRI).

For further information: contact Marshall Burke on +1-650-736-8571 (email: mburke@stanford.edu); Erick Gong on +1-802-443-5553 (email: egong@middlebury.edu); Kelly Jones on +1-202-862-4641 (email: k.jones@cgiar.org); or Romesh Vaitilingam on +44-7768-661095 (email: romesh@vaitilingam.com; Twitter: @econromesh).

A new study by Center on Food Security and the Environment researchers finds that smallholder irrigation systems - those in which water access (via pump or human power), distribution (furrow, watering can, sprinkler, drip lines, etc.), and use all occur at or near the same location - have great potential to reduce hunger, raise incomes and improve development prospects in an area of the world greatly in need of these advancements. Financing is crucial, as even the cheapest pumps can be prohibitively expensive otherwise.

These systems have the potential to use water more productively, improve nutritional outcomes and rural development, and narrow the income disparities that permit widespread hunger to persist despite economic advancement. Only 4 percent of agricultural land in sub-Saharan Africa is currently irrigated.

"Success stories can be found where distributed systems are used in a cooperative setting, permitting the sharing of knowledge, risk, credit and marketing as we've seen in our solar market garden project in Benin," said Jennifer Burney, lead author of the study published in the Proceedings of the National Academy of Sciences.

Moving forward development communities and sub-Saharan African governments need a better understanding of present water resources and how they will be affected by climate change.

"Farmers need access to financial services—credit and insurance—appropriate for a range of production systems," said co-author and Stanford Woods Institute Senior Fellow Rosamond Naylor. "Investments should start at a smaller scale, with thorough project evaluation, before scaling up."

FSE continues to contribute to these evaluations and added eight new villages to our project in Benin last year.