Yesterday I roused myself bright and early to take in an 8 am session at the ASSA meetings on “Valuing Climate Change Catastrophes”. I won’t go into great detail on what I heard, but I thought it would be good to get the word out, so that loyal readers of EconoSpeak can once again get a good night’s rest.
The short of it is that, according to these worthies, the worst case scenarios painted by climate science are small change once the economists get through with them. We are talking about the shutdown of the ocean thermohaline circulation, the collapse of the West Antarctic Ice Sheet, ocean acidification, and potentially massive changes in the earth’s biomes under a new climatic regime.
Thermohaline circulation: This refers to the planet-wide “conveyor belt” of ocean currents driven by temperature and salinity gradients east-west and north-south. It is what makes northern Europe much warmer than the regions of middle and northern Canada at the same latitude, for instance. Suppose as a direct or indirect result of climate change this system were to shut down. The consequences were assessed by Richard Tol, whose presentation style suggested he is unconcerned with difficulties that have arisen regarding his earlier work. Tol’s conclusion: by offsetting rising temperatures due to radiative forcing, thermohaline shutdown would actually increase global welfare, but unfortunately this is unlikely to occur because the unique circumstances that caused this to happen at the end of previous ice ages are no longer with us.
The collapse of WAIS: If this happens, sea level rise will be measured in meters rather than centimeters. Economic models, however, show that with optimal adaptation measures the economic damages are nearly trivial. Spread out over many years, the hardening or relocation of coastal infrastructure constitutes a minute portion of global income. The presenter was Delavane Diaz.
Ocean acidification: This one was juicy. Take the worst case scenario, the complete cessation of marine life due to the collapse of the bottom of the food chain. The economic cost would be the sum of producer and consumer surplus from the global fishing industry, minus the increasing triangles from aquaculture, which is assumed to take its place. As you can imagine, this comes to a paltry sum, measured in tens of billions of dollars at most, not even rounding error in relation to world GDP. The presenter was Rob Mendelsohn.
Shifting biomes: Here the idea was to allow the highest carbon emission scenario of the IPCC to proceed until 2300, which would give us 9º C warming. (I gather this assumes no positive feedback effects, such as through methane releases.) This in turn would shift the size and location of the world’s major biomes—ecological regimes like tropical forest, savannah and desert. What would this mean economically? Step one: based on cross-sectional data, conclude that biome status has no significant effect on economic productivity, with two exceptions, desert and ice sheet, where productivity is zero. Step two: therefore the only question is how much expansion or contraction will occur in the regions of sand and ice. By 2300 the net effect is small, constituting an impact on world GDP of 1% or less. The presenter was Steve Colt.
So there you have it: economics has vanquished the fear of climate catastrophe. Relax and enjoy. Have a great 2016, everyone.