As reported by the CBC, Moody’s analytics has just published a report on The Economic Implications of Climate Change. The CBC’s article focuses on the finding that global warming will actually improve Canada’s economy and, to a less degree, the American economy and how unfair this is to developing countries. The report is long, but I’m going to cover some of the highlights.
In the absence of global pollution mitigation, emission of carbon dioxide from human sources into the Earth’s atmosphere will raise global temperatures. Rising temperatures and shifting precipitation patterns will affect agricultural production and universally hurt worker health and productivity. More frequent and intense extreme weather events will increasingly disrupt and damage critical infrastructure and property. And sea-level rise will threaten coastal communities and island nations.
The natural increase in global temperatures will lead to the same changes, but our CO2 emissions act as an accelerator.
The Intergovernmental Panel on Climate Change report on the impacts of climate change estimates global economic damage to be $54 trillion in 2100 under a warming scenario of 1.5°C and $69 trillion under a warming scenario of 2°C.
I assume these temperatures are referring to scenarios RPC 4.5 and RPC 6.0 in the IPCC report. For more information on the IPCC’s report (and a link to it), see my post Economists Think They are Climatologists. The report predicts that there is 90% chance that we will see one of these two scenarios.
Moody’s evaluates the economic effects of climate change across six distinct impact channels:
- Sea-level rise
- Human health effects
- Heat effect on labor productivity
- Agricultural productivity
- Energy demand
Here’s a quick summary of the reasons behind these categories:
- Rising sea levels reduce productive agricultural land stock through the erosion, inundation or salt intrusion along the coastline.
- Rising global temperatures lengthen the season and increase the geographic range of disease-carrying insects such as mosquitoes, ticks and fleas.
- Heat stress due to high temperature and humidity lowers working speed, necessitates more frequent breaks, and increases the probability of injury.
- Growing seasons will lengthen in colder climates and shorten in hotter ones.
- Warming will likely shift tourism toward higher altitudes and latitudes, increasing visitors to colder countries and reducing travelers to warmer countries.
- Warmer temperatures increase energy demand for cooling in the summer while decreasing the demand for heating in the winter.
The discussion of energy demand raises a couple of very interesting points: First, warmer temperatures will increase demand for electricity, which can be generated by emission free technologies like hydro, solar, wind, or nuclear, for air conditioners, and reduce demand for natural gas, oil and wood, all sources of CO2 emissions, for heating. Second because more energy is used across the globe to heat spaces than is used to cool them, rising temperatures will actually reduce net energy demand.
The analysis then explains the model. Like most economic models, it is based on a lot of assumptions. Feel free to read the linked report for the details.
Finally, Moody’s makes predictions based on their model. Predictably, they emphasize the worst case (RPC 8.5, which has only 5% probability assigned by the IPCC), but they give predictions based on all 4 scenarios. Here’s a summary:
- Sweden will likely see less the 0.35% increase in tourism by 2048, while Singapore would see a 1% decline.
- Russia is predicted to see a 0.25% decrease in productivity by 2048, the US a 1.7% decrease.
They then present a table of predicted deviations in gross domestic product (GDP) by 2048. Here are the values for a few countries, averaging the predictions for IPCC 4.5 and 6.0 (total probability 90%):
|Country||Increase/Decrease (+/-) in GDP by 2048|
To put this in perspective, PWC predicts that by 2050, the United States GDP will increase to $34102B (2016 $ equivalent) from 2016’s $18562, a whopping 83.72% increase. Reducing this by 0.06% hardly seems significant.
In a final piece of good news, the report points out that a six-fold price/performance improvement in lithium ion rechargeable battery technology will help further reduce emissions.
In conclusion, with expected global warming, Moody’s predicts that demand for fossil fuels will go down, as will gas prices. Canada may see a very slight improvement in GDP growth, the US perhaps very slightly less than it might have. Saudi Arabia, due in part to it’s huge dependence on oil, will ironically be the hardest hit. This leaves one to wonder why we are being told that global warming is a crisis.