Dealing with the reality of climate change is often painted as a choice between the environment and the economy, as if it were somehow an either/or proposition. The two are fundamentally connected, as a well-known study published in 1997 illustrated. The study estimated the total economic value of services provided by ecosystems at around $33 trillion each year (in 1997 dollars). If you’ve grown numb to ludicrous dollar amounts, note that the gross “national” product of the planet at that time was about $18 trillion per year.
Clearly climate change will have negative economic consequences, but nailing down the magnitude is a difficult and important task. The economic costs of effective responses to climate change can sound scary when you have nothing to compare them to. Obviously, there are the damages associated with catastrophic events, such as storms, floods, and other natural disasters. But what is the every-day cost of operating in a warming climate?
A paper published recently in the journal Climatic Change by researchers from Sandia National Laboratories in New Mexico examined one small piece of that question—the availability of water in the contiguous United States. They found that the effect on the US economy—even just over the next few decades—would not be trivial.
The researchers chose this subset of the total economic cost to analyze because of the availability of detailed data. By using a number of models included in the 2007 Intergovernmental Panel on Climate Change report that were capable of producing local-scale precipitation data, they were able to estimate how the probability distribution changes through time. In other words, they calculated the changing odds of wet or dry years that industry and agriculture would have to prepare for and adapt to.
This, of course, varies from place to place. For example, the southwestern US will trend toward drier conditions, while the Pacific Northwest will see increased precipitation in the near term. Where water availability decreases, the effects on agriculture are obvious, but there are costs to industry as well. Many industrial processes require the using of cooling water. Converting to more efficient systems can present both an initial investment as well as higher operating costs, even though it’s less costly than inaction. If efficiency gains aren’t an option, production may simply be limited by water availability.
A common macroeconomic model was used to see how those changes would affect the economy. These models can determine indirect as well as direct effects. As George Backus, an economist at Sandia National Laboratories, explained to Ars, “[W]e consider, for example, how the direct loss to the farmer causes additional losses to the fertilizer and farm equipment dealers serving the agricultural sector.”
The model shows that costs would increase sharply towards the end of the simulation period. Just between 2010 and 2050, the best estimate of the accumulated reduction in US GDP is around $1 trillion, with a corresponding loss of seven million jobs. “An important point is that our study only considers impacts through 2050,” wrote Backus. “The accelerating effect of climate change in the years after 2050 would dramatically increase the cost estimates of future impacts.”
Alone, this represents only a fraction of a percent of the US GDP, which was projected to increase from $14 trillion per year to $52 trillion over that time period. But again, this is only one piece of a larger picture. The analysis does not include the effects of increasing temperatures, extreme events like floods and heat waves, wildfires, sea level rise, or ecosystem impacts like agricultural pests or reductions in ecosystem services. (A less-detailed 2008 report estimated the total US economic cost of climate change at $500 billion per year by 2050).
The study also made the simplifying assumption that the US could be studied in isolation. “We purposefully neglected any consideration of how climate change affects the rest of the world and assumed we could import whatever additional goods we needed, due to our reduced output, as if the future global prices were unaffected by climate change,” Backus explained. But in reality, he noted, “The global trade impact due to climate change could be quite significant.”
Using the model simulations that have been performed for next year’s IPCC report, Backus says that this analysis could be repeated on a global scale for trends and extremes in temperature and precipitation. As the American political conversation shifts away from simply getting on board with the facts, concrete economic data like that will help establish priorities and settle on an appropriate course of action. It should already be clear that business-as-usual will be anything but.
Climatic Change, 2012. DOI: 10.1007/s10584-012-0511-8 (About DOIs).
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