Opinion

The Climate Won’t Crash the Economy

By Steven Koonin

Steven Koonin

There are many reasons to be concerned about a changing climate, including disparate impact across industries and regions. But national economic catastrophe isn’t one of them.

Headlines warned of economic doom after the U.S. government released its fourth National Climate Assessment last week. Yet a close reading of the report shows that the overall economic impact of human-caused climate change is expected to be quite small.

Projecting human-caused changes in the global climate is a major scientific challenge; estimates of the temperature increases due to rising greenhouse-gas concentrations are uncertain by a factor of three. Trying to make projections for a particular region—such as the contiguous U.S., which comprises only 1.6% of the globe’s surface—compounds the uncertainty. Estimates of the economic impact are less certain still, in part because as-yet-unknown modes of adaptation will mitigate the effects.

The report’s numbers, uncertain as they are, turn out not to be all that alarming. The final figure of the final chapter shows that an increase in global average temperatures of 9 degrees Fahrenheit (beyond the 1.4-degree rise already recorded since 1880) would directly reduce the U.S. gross domestic product in 2090 by 4%, plus or minus 2%—that is, the GDP would be about 4% less than it would have been absent human influences on the climate. That “worst-worst case” estimate assumes the largest plausible temperature rise and only known modes of adaptation.

To place a 4% reduction in context, conservatively assume that real annual GDP growth will average 2% in the coming decades (it has averaged 3.2% since 1935 and is currently 3%). That would result in a U.S. economy roughly four times as large in 2090 as today. A 4% climate impact would reduce that multiple to 3.8—a correction much smaller than the uncertainty of any projection over seven decades. To put it another way, the projected reduction in the average annual growth rate is a mere 0.05 percentage point. The U.S. economy in 2090 would be no more than two years behind where it would have been absent man-caused climate change.

Read the full The Wall Street Journal article.
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Steven Koonin is a Professor of Information, Operations & Management Sciences and the Director of NYU Center for Urban Science and Progress (CUSP).