Global and regional aggregate damages associated with global warming of 1.5 to 4 °C above pre-industrial levels. R. Warren, C. Hope, D. E. H. J. Gernaat, D. P. Van Vuuren & K. Jenkins. Climatic Change volume 168, Article number: 24. Oct 22 2021. https://link.springer.com/article/10.1007/s10584-021-03198-7
Abstract: We quantify global and regional aggregate damages from global warming of 1.5 to 4 °C above pre-industrial levels using a well-established integrated assessment model, PAGE09. We find mean global aggregate damages in 2100 of 0.29% of GDP if global warming is limited to about 1.5 °C (90% confidence interval 0.09–0.60%) and 0.40% for 2 °C (range 0.12–0.91%). These are, respectively, 92% and 89% lower than mean losses of 3.67% of GDP (range 0.64–10.77%) associated with global warming of 4 °C. The net present value of global aggregate damages for the 2008–2200 period is estimated at $48.7 trillion for ~ 1.5 °C global warming (range $13–108 trillion) and $60.7 trillion for 2 °C (range $15–140 trillion). These are, respectively, 92% and 90% lower than the mean NPV of $591.7 trillion of GDP for 4 °C warming (range $70–1920 trillion). This leads to a mean social cost of CO2 emitted in 2020 of ~ $150 for 4 °C warming as compared to $30 at ~ 1.5 °C warming. The benefits of limiting warming to 1.5 °C rather than 2 °C might be underestimated since PAGE09 is not recalibrated to reflect the recent understanding of the full range of risks at 1.5 °C warming.
Analysis with a simple probabilistic integrated assessment model PAGE09 indicates the mean global aggregate damages in 2100 of the different scenarios and their uncertainty ranges. These are 0.29% of GDP (5–95% range 0.09–0.60%) from constraining warming to 1.5 °C with 66% probability, 0.40% of GDP (5–95% range 0.12–0.91%) from constraining it to 2 °C with 66% probability and 3.67% of GDP (5–95% range 0.64–10.77%) from allowing emissions to rise along a no-policy baseline, leading to a mean GMT rise of 4 °C in 2100. Warming associated with the NDCs allows mean global aggregate damages in 2100 to reach 1.70% of GDP (5–95% range 0.31–5.99%). The net present value of global aggregate damages for 2008–2200 is estimated at $48.7 trillion for ~1.5 °C global warming (5–95% range $13–108 trillion) and $60.7 trillion for 2 °C (5–95% range $15–140 trillion). Correspondingly, the mean net present value of avoided damages that would otherwise accrue by 2200, associated with limiting warming to 1.5 °C rather than 4 °C, is estimated as 543 trillion US$ (2010), as compared with 531 trillion due to limiting warming to 2 °C.
However, these damages are likely conservative because the damage functions described in Section 2.1 are based on literature published before 2009, mostly matching the IPCC Third Assessment Report (IPCC 2007). The overall assessment of risk from climate change with global warming finds greater risks for the same level of warming than in 2009 (IPCC 2014, 2018; Zommers et al. 2020). For example, between 2014 and 2018, the assessed levels of concern ‘increased for four of the five Reasons for Concern’ for global warming of 2 °C (IPCC 2018). Also, apart from the discontinuity sector, the damage functions in PAGE09 depend only on the climate in a particular year, so any dynamic damages, where damage accumulates due to indirect consequences of climate change in earlier years, is not yet included (Burke et al. 2015).
A further contribution to the potential for damages to be underestimated here is that damages associated with arctic feedbacks leading to the release of CO2 and CH4 from permafrost are excluded from this analysis. In parallel with our work, independent updates to the PAGE09 model were made. This includes the development of PAGE-ICE(Yumashev et al. 2019) to reflect non-linear transitions in arctic feedbacks (permafrost and albedo effect), the calibration of equilibrium climate sensitivity values to match IPCC AR5 and other earth system science models, changes in the treatment of regional cooling by sulphate aerosols, a revised carbon cycle consistent with recent literature (Joos et al. 2013) and the use of a fat-tailed distribution for sea level rise to represent possible contributions to sea level rise from melting of the Greenland Ice Sheet. The damage functions were also upgraded in PAGE-ICE to reflect a recent macro-econometric analysis of the effect of historic temperature shocks on economic growth in multiple countries (Burke et al. 2015).
PAGE-ICE was subsequently used to estimate aggregate economic damages under different combinations of socioeconomic and climate change futures (Chen et al. 2020). Comparing the SSP2-based projections emerging from PAGE-ICE(Chen et al. 2020) vs PAGE09 reported here is interesting (Tables S4, S5, S7). At global warming of 2.5C in 2100, PAGE09 projects mean damages of 1.08% GDP (5-95% range 0.22–3.37), while PAGE-ICE projects damages of 6% GDP already at 2.7 °C (Chen et al. 2020)(Table S4). Similarly, PAGE09 estimates the mean NPV of damages in 2200 for warming of 2.5 °C at US$148 trillion (5-95% range $20–470), whereas at 2.7 °C, Chen et al. (2020) report US$569 trillion (5–95% range − 119–1722) including only damages to 2100 (Table S5). Inconsistencies notwithstanding, this represents a four-fold increase in damages comparable with the threefold increase emerging from the independent study of Hänsel et al. (2020).
The relatively small differences produced in PAGE09 between the damages associated with 1.5 rather than 2 °C global warming might be due to the PAGE09 damage function not yet well capturing the findings of IPCC (2018), and also the limited coverage of the effects of extreme weather events which will play an important role in determining aggregate damage. Nevertheless, these small increases represent a 41% increase in damages for the 2 °C scenarios with respect to the 1.5 °C scenario, increasing further to a 66% increase in Chen et al.(2020). Hence, the use of PAGE-ICE increases both the absolute damages avoided by limiting warming to lower temperatures and also increases the relative (percentage) increase.
Arent et al. (2014) review global aggregate damage estimates originating from various integrated assessment models, including various versions of FUND, DICE and PAGE and generally find aggregate damage estimates of between 1 and 3% of global GDP for global warming of 3 °C, while a more recent review (Tol 2018) finds similar values. A study with the integrated model DICE2016R2, which includes a blanket 25% uplift to damages to account for discontinuities (Nordhaus and Sztorc 2013), produces a year 2100 damage estimates of 2.0% of income at 3 °C and 7.9% of global income at a global temperature rise of 6 °C (Nordhaus 2018). This is similar to the PAGE09 mean estimate of 1.7% income at 3C warming (Table S1). It should be noted that the calibration of DICE2016R2 included output from PAGE09 as one of its calibration points (Nordhaus 2018), while an uncertainty analysis performed with DICE2016R2’s baseline scenario yielded damage ranges (within one standard deviation) of approximately 1.5–6% GDP for warming of 3.3–4.8 °C (see Fig. 7A, B in Nordhaus 2018).
More recently, further updates were made to the DICE2016R2 model (Hänsel et al. 2020), including changes to the carbon cycle, making it consistent with the IPCC Special Report on 1.5 °C warming (Rogelj et al. 2018), a recalibration to update the treatment of energy balance, the use of emerging literature to recalibrate the temperature-damage relationship, use of an exogenous pathway for non-CO2 forcing, the availability of negative emission technologies and the technologically feasible speed of decarbonisation. The utilised damage-temperature relationship (Howard and Sterner 2017) indicates damages of 6.69% of global GDP for a 3 °C global temperature rise while noting that there is empirical evidence for even larger damages (Burke et al. 2015)—increasing the damages by a factor of 3. DICE2016R2 now finds an optimal limit to global warming of 1.77 °C in 2100, producing a mean social cost of carbon dioxide in 2020 of 119US$/tCO2 (including all model updates) (Table S6) as compared with mean values of 30–43 $/tCO2 for 1.5–2 °C warming in 2100 here (Table 5 and Table S6), representing an approximately three-fold increase.
Both these comparisons indicate how recent updates in the understanding of the earth’s climate system and in the observation and projection of risks associated with global warming have had a profound effect on the estimates of associated economic damages. Updates to integrated assessment models have often lagged behind increases in scientific understanding, leading to these damages being underestimated in the past, as noted previously (Warren et al. 2006; Warren et al. 2010; Van Vuuren et al. 2011).
While Hänsel et al. (2020) and Chen et al. (2020) address many of the issues raised in those earlier publications, neither PAGE09 nor PAGE-ICE ‘explicitly model other known climatic tipping elements such as Amazon rainforest, boreal forest, coral reefs and El Niño–Southern Oscillation (ENSO), as well as ocean acidification and climate-induced large-scale migration and conflict’ (Yumashev et al. 2019), while Hänsel et al. 2020 note that excluded factors include ‘tipping points, relative scarcity of non-market goods, and climate-induced migration’. Projected risks to biodiversity will interact, via loss of ecosystem services, with the projected risks estimated here, creating a risk cascade (Warren 2011). Such systemic linkages, and their consequences, are difficult to quantify. Hence, the projections provided here are likely conservative and in particular will not reflect the findings of IPCC (2018), which outline important reductions in climate change damages associated with limiting warming to 1.5 °C rather than 2 °C, for example, in terms of reduced damages on ecosystems, terrestrial and marine biodiversity and ocean acidification. This, together with ongoing improvements of understanding of climate change science and climate change-related risks, means that estimates of aggregate economic damages associated with climate change inevitably continue to fall short of a complete representation within integrated assessment models, and hence, even these latest projections probably still lead to underestimates of global aggregate economic damage associated with climate change that would be expected to actually occur.
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