The Macroeconomic Impact of Climate Change: Global vs. Local Temperature

Adrien Bilal and Diego Känzig

No 32450, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper estimates that the macroeconomic damages from climate change are six times larger than previously thought. Exploiting natural global temperature variability, we find that 1°C warming reduces world GDP by 12%. Global temperature correlates strongly with extreme climatic events, unlike country-level temperature used in previous work, explaining our larger estimate. We use this evidence to estimate damage functions in a neoclassical growth model. Business-as-usual warming implies a 25% present welfare loss and a Social Cost of Carbon of $1,367 per ton. These impacts suggest that unilateral decarbonization policy is cost-effective for large countries such as the United States.

JEL-codes: E01 E23 F18 O44 Q54 Q56 (search for similar items in EconPapers)
Date: 2024-05
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Working Paper: The Macroeconomic Impact of Climate Change: Global vs. Local Temperature (2024)
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