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Commentary By Oren Cass

Doomsday Climate Economics Is a Joke

Energy, Energy Climate, Technology

One study says world GDP will drop 20% by 2100, but Iceland and Mongolia will be rich beyond imagining.

Debates over climate change are filled with dire estimates of its cost. This many trillions of dollars of damage, that large a share of gross domestic product destroyed, so-and-so many lives lost, etc. Where do such figures come from? Mostly from laughably bad economics.

This has nothing to do with the soundness of climate science. The games begin when economists get their hands on scientific projections and try to translate temperatures into human impacts. They conduct statistical analyses of the effects that small year-to-year temperature variations have on things like mortality and economic growth, and try to extrapolate to the effect of very large, slow shifts in underlying climate. This creates absurd estimates that ignore human society’s capacity for adaptation. This is the latest iteration of the same mistake environmental catastrophists seem insistent on making in every generation.

The best illustration lies deep in a 2015 paper published in Nature by professors from Stanford and the University of California, Berkeley. They found that warm countries tended to experience lower economic growth in abnormally warm years, while cold countries experienced higher growth in such years. Applying that relationship to a much warmer world of the future, they concluded that unmitigated climate change would likely reduce global GDP by more than 20% from what it otherwise would reach by century’s end.

That is roughly an order of magnitude higher than prior estimates, and it has received widespread media attention. But it is as preposterous as it is stunning.

While the world economy stagnates, the model projects, cold countries will achieve almost unimaginable wealth. Iceland supposedly will achieve annual per capita income of $1.5 million by 2100, more than double that of any other country except Finland ($860,000). Mongolia, which currently ranks 118th in per capita income, is supposed to rise to seventh, at which point the average Mongolian will earn four times as much as the average American. Canada’s economy becomes seven times as large as China’s.

The technical term to describe this analysis is “silly.” Obviously, the relationship posited between temperature and growth has little to do with reality.

Sadly, this paper represents the norm. Last fall the U.S. Government Accountability Office released a summary of existing research on future climate costs for the United States. As I show in a new reportpublished by the Manhattan Institute, a small set of studies dominate this research. They reach their imposing dollar figures by refusing, like the Nature study, to consider how society will evolve and adapt.

One Environmental Protection Agency study estimates the potential increase in extreme-temperature deaths by looking at city-specific effects. It assumes that a day counting as unusually hot for some city in 2000 will cause a similar mortality increase in that city in 2100, even if climate change makes it no longer unusual.

The result is a projection that a hot day will kill massive numbers in Northern cities by 2100—though such temperatures are already routine at lower latitudes with no such ill effects. Pittsburgh’s extreme-temperature mortality rate is supposed to be 75 times as high in 2100 as that of Phoenix in 2000, though Pittsburgh will not be as hot then as Phoenix was a century earlier.

But if Pittsburgh’s climate steadily warms over the coming century, it will not react to a 100-degree day in 2100 the same way it did in 2000. Even if it didn’t warm, we should assume that economic and technological advancement will make the city and its residents more resilient to heat than they are today.

Another analysis relied on by GAO, taking its own approach to extreme-temperature deaths, inadvertently makes this point—then proceeds to ignore it. The “American Climate Prospectus” attempts to combine two different studies that consider whether very hot days—during which the average temperature is above 90 degrees—have higher mortality than days with moderate temperatures. The first of these studies used data from 1968–2002 and found that the answer was yes.

But a second study, published later by some of the same authors, looked at how this relationship had changed over time. Here they found that the mortality rate on hot days had declined precipitously. The adoption of air-conditioning, they concluded, “has positioned the United States to be well adapted to the high-temperature-related mortality impacts of climate change.”

Incredibly, even though overlapping authors had contributed to both of these studies, and one of them was also a reviewer of the “Prospectus” analysis, the “Prospectus” ignored the declining-mortality trend and claimed climate change would kill tens of thousands annually.

This question of adaptation, and how to account for a future different from the present, is not an esoteric detail for science and economics. It is fundamental to understanding the challenge posed by climate change.

If you imagine society is static and incapable of innovation, the prospect of climate change must be terrifying—all of humanity paralyzed like Michelle Pfeiffer in “What Lies Beneath,” watching the bathtub fill slowly with water.

But horror movies are not reality. The 1960s overpopulation scare made sense, assuming that society would not find more productive ways to farm. The 1970s fear of impending limits to growth made sense, assuming that society could not expand a finite supply of resources. Those doomsday predictions failed because the underlying assumption was mistaken. Society is constantly adapting to all sorts of changes. If a projection of climate-change cost ignores adaptation, we can safely ignore it.

This piece originally appeared in The Wall Street Journal


Oren Cass is a senior fellow at the Manhattan Institute and author of the new report, Overheated: How Flawed Analyses Overestimate the Costs of Climate Change. Follow him on Twitter here.

This piece originally appeared in The Wall Street Journal