In 2018, economist William Nordhaus won the Nobel Memorial Prize in Economic Sciences for his Dynamic Integrated Climate-Economy model, which was the first neoclassical growth model to incorporate the impacts of a warming planet on the global economy. While celebrated for its economic innovations, the DICE model and its outputs have been criticized by climate scientists for not adequately considering the devastating impacts that a rapidly warming planet will have on the environment, human wellbeing, and the economy. Conventional attempts of forecasting GDP impacts of a one degree increase in global temperatures using the DICE model typically produce estimates of little more than a 1% decrease in global GDP. Critics argue that by downplaying the future economic costs resulting from a warming planet, these types of economic models make it easier for policymakers to justify delaying actions now to reduce emissions and slow or even stop global warming.
But in a new paper titled "The Macroeconomic Impact of Climate Change: Global vs Local Temperature", Dr. Adrien Bilal and Dr. Diego Kaenzig unveil a new model to predict the impact that global warming will have on the global economy. Their findings suggest previous studies were significantly off and, in fact, global GDP will be drastically reduced if the planet continues to warm on its current trajectory. Dr. Bilal and Dr. Kaenzig join The Climate Pod to discuss their new paper, how their approach differed from previous attempts at quantifying the economic impact of climate change, and what this means for policymakers.
Dr. Adrien Bilal is an Assistant Economics Professor at Harvard University.
Dr. Diego Kaenzig is an Assistant Economics Professor at Northwestern University.
Read the paper here: https://www.nber.org/papers/w32450
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