The economic commitment of climate change

The Institute of Economics will hold a seminar meeting as part of its Seminar Series on Tuesday, February 6, 2024: Leonie Wenz from Potsdam Institute for Climate Impact Research (PIK) will present the paper “The economic commitment of climate change (M. Kotz, A. Levermann, L. Wenz)".

Abstract

Global projections of macroeconomic climate-change damages typically consider impacts from average annual and national temperatures over long-time horizons. Here, we utilize recent empirical findings from more than 1600 regions worldwide over the past 40 years to project sub-national damages from temperature and precipitation including daily variability and extremes. Using an empirical approach which provides a robust lower-bound on the persistence of impacts on economic growth, we find that the world economy is committed to an income reduction of 19% within the next 26 years due to historical carbon emissions and socioeconomic inertia (relative to a baseline without climate impacts, likely range of 11-29% accounting for physical climate and empirical uncertainty). These damages already outweigh the mitigation costs required to limit global warming to two degrees by sixfold over this near-term timeframe, and thereafter diverge strongly dependent on emission choices. Committed damages arise predominantly through changes in average temperature, but accounting for further climatic components raises estimates by approximately fifty percent and leads to stronger regional heterogeneity. Committed losses are projected for all regions except those at very high latitudes, where reductions in temperature variability bring benefits. The largest losses are committed at lower latitudes in regions with lower cumulative historical emissions and lower present-day income.

The Seminar will be held in Aula 5.