Thinking about the cost of global warming: Getting beyond GDP

post by Bill Gardner

Preventing (or mitigating) global warming is going to be expensive. But how much should we spend on prevention, and when? To answer that question it seems natural to first estimate how much global warming will cost. But to do that, we have to define a measure of such costs. And that's not easy.

One way to calculate the cost of global warming is to project future trajectories of global gross domestic product (GDP) based on different assumptions about how the climate works and different regimes of energy consumption and greenhouse gas emissions. So one idea is that we should pick the mix of prevention/mitigation strategies that maximizes long term GDP. This is appealing because it gives us a single dimension to rank solutions on. Nordhaus and Stern (I've read only the former) are comprehensive analyses of the costs of warming and preventing warming that measure harm using GDP. For a brief, thoughtful (and conservative) discussion, see Manzi. 

Unfortunately, looking only at GDP is an inadequate way to think about the cost of global warming, for several reasons.

1. GDP sums up the value of the goods and services we produce and consume. It takes no account of the particular individuals who gain and lose. Every analysis I have seen suggests that the current and future global poor will be harmed by warming significantly more than the global rich; whereas the global rich will benefit substantially more from global energy consumption. Even if we were to conclude that the aggregate harm of global warming was acceptable, the uneven distribution of those harms is likely to be unjust.
2. GDP has an uncertain relationship to human well-being, and it is human well-being that truly matters. There are scenarios for global warming in which large areas of the world that are currently temperate will experience sustained summer peak temperatures in the range of 35-40°C (95-104°F), resulting in significant ecosystem loss. This might not, however, dramatically reduce GDP, because all the efforts we have to undertake to adapt to increased global temperature will contribute to GDP. Suppose an increase in temperature kept GDP constant but shifted our economical activity toward producing powerful air conditioners, and away from other things. We would be worse off, whatever GDP says.
3. More importantly, global warming may produce effects on well-being that are not captured by GDP. The increasing concentration of CO2 is rapidly increasing the acidity of the ocean. There is a point where the pH will be incompatible with the survival of most ocean species. If the oceans die, would the resulting loss of GDP be our only loss of well-being?

GDP calculations are important, but they are not a sufficient basis for decision making about global warming.

Comments

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