Climate Crisis Could Be Six Times Costlier Than Previously Thought

One of the most repeated arguments against taking action to address the climate crisis is it will hurt the economy. But increasing evidence suggests that not taking action will hurt it.

Now, a recent study published in Environmental Research Letters has estimated that the economic costs of rising temperatures could be six times higher by 2100 than previously thought, further weakening the case for inaction.

“The suggestion of, ‘Oh, it’s too expensive to do it now,’ is utterly false economy,” study co-author and University College London (UCL) associate professor in climate science Chris Brierley tells Treehugger.

Social Cost of Carbon

Brierley and his team focused on a metric called the social cost of carbon dioxide (SCCO₂), which they define as “the projected cost to society of releasing an additional tonne of CO₂.” This is the metric used by the Environmental Protection Agency (EPA) to assess the dollar value of climate policies in terms of damages either inflicted or avoided.

SCCO₂ is determined using climate models, and Brierley and his team wanted to see what would happen if those models were updated. In particular, they worked on a model called the PAGE model, which is relatively simple and can be run on a basic desktop computer. 

First, they updated the model by incorporating the most recent available climate science from the Intergovernmental Panel on Climate Change’s (IPCC) Fifth Assessment Report. The study authors were not yet able to incorporate data from the Sixth Assessment Report chapter on physical climate science published in summer 2021, but Brierley says he suspects it would not have changed their results much, since the climate sensitivity estimate used in the report hasn’t changed. However, he suspects later chapters focusing on the economic impacts of climate change would make a difference to the model.

“Through all the developments of this model, pretty much everything you do when you discover something new . . . makes the cost of carbon be higher,” Brierley says.  

Overall, the researchers found that the changes they made to the model about doubled the mean 2020 social cost of carbon dioxide, from $158 to $307 per metric ton. 

Persistence of Damages

However, the most important update to the model involved what happens when a climate-related disaster or event damages the economy. In the past, the model had assumed that after a particular event like a hurricane or wildfire, the economy would be temporarily harmed and then immediately bounce back. 

The other extreme would mean assuming that the economy never recovers from a particular shock, and the damages steadily accumulate over time.

But study co-author Paul Waidelich found that neither extreme was accurate. Instead, damages tend to be around 50% recoverable from and 50% persistent. Brierley offers the example of Hurricane Katrina. 

“Obviously it caused an awful lot of damage,” Brierley says, “but New Orleans is back up and running as a city within a year or two. . . . So there’s some rapid recovery, but on the other hand there’s some permanent damage and New Orleans has never recovered back to where it was before Katrina.” 

Another timely, but not-climate related example is the current coronavirus pandemic. In the United Kingdom, where Brierley is from, there was an immediate rebound when pubs and restaurants reopened, but some impacts will likely last for years. 

“It’s good at highlighting that difference between the different time scales of the recovery,” Brierley says of the pandemic.

The researchers wanted to see what difference it would make if they incorporated the persistence of economic damages into their climate model.

“What we show is that that makes a massive difference,” Brierley says. 

In fact, when persistent damages were not accounted for, the model predicted that gross domestic product (GDP) would fall by 6% by 2100, a UCL press release explains. When they were factored in, that decline rose to 37%, six times greater than the persistence-free estimate. Because there are so many uncertainties involved with how exactly climate might impact economic growth, global GDP could actually be lowered by as much as 51%. Incorporating the persistence of damages into the model caused the social cost of carbon dioxide to shoot up by an order of magnitude. If only 10% of damages were expected to persist, for example, the mean SCCO₂ rose by a factor of 15.

“Here we show that if you include this persistence, then it causes a massive increase in the amount of damages you’d expect by the end of the century coming from climate change, cause you’ve sort of got stuff accumulating rather than being rapidly recovered from,” Brierley says.

Who Pays?

This study is far from the only warning about the economic costs of allowing climate change to continue unabated. On October 14, 2021, President Joe Biden's administration released a report warning of the economic impacts of climate change and outlining steps to address them. The report pointed to wildfires in 2021 that had devoured six million acres of land and disrupted international supply chains, as well as Hurricane Ida, which shuttered the New York City subway system for hours. 

“As this year draws to a close, the total damage of extreme weather will build upon the $99 billion already incurred by American taxpayers in 2020,” the report authors wrote. 

But as awareness of these impacts grows, why doesn’t this translate into action?

“I suppose in some respects the simple answer is that often the person gaining the benefit from the pollution is not the person paying for the damages,” Brierley says. “The major climate damages coming from the emissions we do today are a generation down the line. Although we can and we are trying to legislate to do something about it, it’s hard if it doesn’t hit your own pocket.” 

There is also a geographical disconnect between profits and impacts. The study authors found that most of the increase to the mean SCCO₂ was due to costs in the Global South, while the mean for the Global North alone remained largely unchanged, since some cooler regions may actually benefit from warmer temperatures. 

The Problem With Growth

One emerging line of thinking might question the relevance of studies like Brierley’s. Some thinkers are challenging the mantra that economic growth is beneficial and necessary, especially in already wealthy countries. Further, that growth itself contributes to the climate crisis. 

In an article published in Nature Energy this summer, economic anthropologist Jason Hickel and his co-authors pointed out that climate models assume the economy will continue to grow, and can only keep global temperatures at 1.5 or 2 degrees Celsius above pre-industrial levels by relying on untested technologies like carbon capture. However, in already wealthy nations, more growth is not necessary to improve people’s lives.

“Policymakers commonly regard economic growth as a proxy for human development and social progress. But past a certain point, which high-income nations have long exceeded, the correlation between GDP and social indicators breaks down or becomes negligible,” Hickel and his colleagues wrote. “For instance, Spain significantly outperforms the USA in key social indicators (including a life expectancy that is five years longer), despite having 55% less GDP per capita.”

Hickel and his co-authors called for climate models that incorporated the possibility of post-growth policies in wealthier countries. While Brierley’s model is not designed to test what actions will increase or decrease temperatures, it does rely on the assumption that GDP is a useful metric of economic well-being. If, in fact, the emphasis on economic growth is contributing to the climate crisis, then maybe the question isn’t whether climate action harms or hurts the economy, but whether we can design an economic system that doesn’t threaten the climate that supports human and animal well-being.

Brierley acknowledges there might be value in measuring something like happiness or health instead, but as of now, there isn’t enough data to plug something like this into his model. Further, focusing on economic impacts is often still the best way to persuade politicians to act.

“The aim of quite a lot of this work is to feed into policymakers who think about economic growth impacting their elections,” he says.