Global warming may boost economic inequality

Over the past half-century, climate change has been blamed for heat waves, flooding, and rising seas. Now, researchers say warmer temperatures are widening the chasm separating richer and poorer countries, effectively boosting the economies of many wealthy polluters while dampening growth in much of the developing world. As a result, inequality between the haves and have-nots is already 25% greater than it would be in a cooler world, the paper asserts.

Though he disagrees about the numbers, University of California, Berkeley, economist Solomon Hsiang says the paper provides clear evidence that climate change has stunted economies in the developing world. “The study’s statement that warming should have already harmed economic opportunities in poor countries is extremely important,” he wrote in an email.

The new work builds on previous research that found economic activity peaks at an average temperature of 13°C. Call it a “Goldilocks” condition that’s neither too hot nor too cold. Lower temperatures can hamper weather-dependent sectors like agriculture, but hotter temperatures can wither crops, sap workers’ energy, and exacerbate social conflicts. That study found that climate change could reduce overall global economic output by 23% by 2100.

In the new study, the duo of climate scientist Noah Diffenbaugh and economist Marshall Burke, both at Stanford University in Palo Alto, California, used climate and economic models to tease out the economic impacts of climate change country by country, starting in 1961. Their model compared how each country performed in hotter and colder years, while accounting for other factors such as technological innovations and gyrations in the global economy. From each country’s response to temperatures, the modelers created two “worlds,” one reflecting actual global warming and another without greenhouse gas pollution.

Comparing them showed that between 1961 and 2010, many countries near the equator, which are generally poorer, lost an average of more than 25% of potential growth in gross domestic product (GDP) because of global warming, the researchers report today in the Proceedings of the National Academy of Sciences . Many cooler, mostly wealthier countries, in contrast, enjoyed an economic bump of 20% or more, thanks to warmer weather. Since 1961, for example, Norway’s per capita GDP grew an extra 34%, while India lost almost the same amount.

Small economic damages can have outsize effects, because those in one year can ripple out to future years, Burke says. For instance, an agribusiness that lost money in a heat wave might invest less in equipment or research. “Even small changes in the growth rate compound over time and you can see big effects,” he says.

Hsiang, who was the lead author of a 2017 paper that concluded the U.S. economy would lose approximately 1.2% of GDP with a 1°C increase in average temperatures, cautions against giving too much weight to the numbers, especially the apparent gains for cooler countries. The approach doesn’t confirm the results with “real world evidence that it actually happened,” he says.

Burke acknowledges that more complete economic data could make for more certainty. But he defends the results as “the best possible interpretation of the data,” and says they could feed discussions about whether richer nations responsible for the lion’s share of historic emissions should compensate poorer nations for climate damage. And both Hsiang and the Stanford researchers agree on the need for more research on climate and inequality. One big question: Does warming exacerbate inequality within a country?