In a blog written after the devastating bushfires that swept across his home state of New South Wales, Australian economist Steve Keen states, "I have to admit that I am personally not coping well with climate change".

Professor Keen says he's feeling the "same generalised anxiety about the future felt by Greta Thunberg and the young people she's inspired to strike for the climate", before criticising the work of William Nordhaus and other neoclassical economists.

"Since policymakers take what economists predict seriously — even after the 2008 financial crisis — they have been duped and have drastically underestimated how severe climate change will actually be," Professor Keen argues.

William Nordhaus is a renowned American economist whose work modelling the economic impact of climate change earned him the 2018 Nobel Memorial Prize in Economic Sciences.

He is not a climate change denialist. His view is that greenhouse gas emissions from human activities will have a negative impact and he's urged governments globally to implement a carbon tax.

But it's the extent to which Professor Nordhaus — and other economists who agree with him — predict climate change will impact the economy (and thereby the level of action needed to curb it) that has been the subject of intense debate.

The Paris Agreement goal is to keep global warming this century well below two degrees Celsius compared with pre-industrial levels.

Swedish climate activist Greta Thunberg has inspired many young people around the world to strike for climate change. ( AP: Markus Schreiber )

At one end of the scale are Professor Nordhaus and Richard Tol.

Tol, a professor of economics at the University of Sussex, has since 1994 been a convening lead author with the United Nations body for assessing the science related to climate change, the Intergovernmental Panel on Climate Change (IPCC).

Both Nordhaus and Tol argue that the world can survive a 4°C increase in global average temperature and the economic impact won't be severe.

They also argue we shouldn't reduce emissions too quickly, because the economic cost to people today will be higher than the benefit of protecting people in the future.

Professor Nordhaus told ABC News he was not available to comment, but has previously said that "optimal policy" would result in global warming of about 3°C by 2100 and 4°C by 2150.

William Nordhaus, one of the laureates of the Nobel Prize in Economics on the screen, has long argued that we shouldn't reduce emissions too quickly. ( AP: Henrik Montgomery )

At the other end of the scale are people like British economist Nicholas Stern and Professor Keen who argue that at 4°C the world would reach a tipping point — when the impacts of climate change become so catastrophic that it is possibly too late to reverse them.

So why do economists differ so greatly, and is anyone ultimately right?

Richard Tol: the loss from climate change won't be immense

When the IPCC delivered its Fifth Assessment Report in October 2014, Professor Tol was one of the authors of chapter 10.

Richard Tol, a convening lead author with the IPCC since 1994, believes technology will help advanced nations cope with climate change and limit economic damage. ( Supplied: Richard Tol )

This chapter looked specifically at the economic impacts of climate change, and has come under criticism from other economists for some of its estimates.

It suggested that, while "many estimates do not account for catastrophic changes, tipping points, and many other factors", the global annual economic losses for additional temperature increases of ~2°C are between 0.2 and 2.0 per cent of income.

Meanwhile, a summary chapter of that report used far stronger language.

The summary said that mitigation pathways to limit warming to below 2°C relative to pre-industrial levels "would require substantial emissions reductions over the next few decades and near zero emissions of CO2 and other long-lived greenhouse gases by the end of the century".

At the time Professor Tol had disagreed with some findings of the summary of that chapter as being "too alarmist".

Professor Tol's view is that climate change is a problem, but that welfare loss will not be immense.

He believes that technological advancement will help advanced nations cope with the impact of climate change, and this in turn will dent the negative economic impact.

"We have decent observations on natural disasters going back a century, data on crop yields going back longer," Tol tells ABC News.

"These data all show that, over time, we have become much less vulnerable to weather and climate, partly because economic growth has meant that we can afford to better protect ourselves, and partly because technology is so much better now."

But Professor Tol is worried that the impact will be disproportionate depending on where people live. That is, people in poorer countries are more vulnerable than those living in richer countries.

He says, while rapid warming of the Earth would be very costly, he believes that "warming is not very rapid".

Even moving beyond 4°C to a 6°C warming scenario, he says the world won't end.

"6°C is the difference between Melbourne and Perth," Professor Tol argues.

"If it were to warm by 6°C degrees in a century — it will not — you have about 100 years to upgrade Melbourne's air-conditioning, drainage, etc, to Perth standards. That costs money, but it won't ruin the economy."

Steve Keen: 4°C would unleash a 'howitzer'

But Professor Steve Keen, who now works as an honorary professor at University College London, responds that humanity has never existed in, let alone experienced, a planet with that temperature.

Australian economist Steven Keen says humanity has never existed in, let alone experienced, a planet with a 4°C increase in global average temperature. ( The 7.30 Report )

"How on Earth would such a drastic change in temperature make such a tiny difference to GDP?," Professor Keen asks.

He says economists like Nordhaus and Tol use data on GDP and temperature today across the globe (and primarily, across the USA) as a proxy for what will happen when global temperatures rise.

Their models, he argues, assume technology improves at such a rapid pace that the impact of such catastrophic events will be muted.

"All their models tell us is that they have faith — and a faith that bears no relation to the actual way in which capitalist economies function," Professor Keen says.

One of Professor Nordhaus's papers includes an equation for calculating the damage from climate change impacts that "assumes that damages are 2.1 per cent of global income at 3°C warming and 8.5 per cent of income at 6 °C warming".

Professor Keen argues that even if we had 500 years to do adapt to rising sea levels, Nordhaus' argument is ridiculous.

"So much of humanity's resources would be damaged or destroyed, so much would need to be devoted to rebuilding, moving, and resettling," Professor Keen says.

"We would be lucky to have any resources left to produce output, let alone expand it."

He also notes in a recent blog that Nordhaus's estimates of the potential economic damage exclude entire industries such as manufacturing and mining.

"Nordhaus has put the world into a Dirty Harry movie gone bad: having advised policymakers that a simple and low tax on carbon is a Magnum 44 for shooting climate change, they scoff at the danger, telling climate change, 'Do you feel lucky, punk?'.

"In reality, climate change is armed with a howitzer, and the policy Nordhaus recommends — letting the global temperature reach levels 4 degrees above preindustrial levels — would unleash that howitzer."

Nicholas Stern: economists 'grossly underestimate' climate change cost

The Grantham Research Institute on Climate Change and the Environment is chaired by Nicholas Stern, who in 2006 led a review on the economics of climate change for the British Government.

British economist Nicholas Stern co-authored a report noting economists had "grossly underestimated many of the most serious consequences" of climate change. ( Kieran Doherty: Reuters )

Grantham, in September 2019, released a report noting that "economic assessments of the potential future risks of climate change have been omitting or grossly underestimating many of the most serious consequences for lives and livelihoods".

The report argued this happened because such risks are difficult to quantify and lie outside of human experience.

Dr Stern was not available to comment.

But Bob Ward, the policy and communications director at Grantham who co-authored that report with Dr Stern and other economists, tells ABC News there are problems with models used by Nordhaus, Tol and others.

"There is good evidence that we are rapidly approaching, or may already have passed, the critical temperature at which destabilisation of the major land-based ice sheets in Greenland and West Antarctica becomes inevitable," Mr Ward says.

This, he adds, would see several metres of global sea level rise.

"Together, the Greenland and West Antarctica ice sheets contain enough ice to raise global sea levels by about 13 metres.

"Such sea level rise might take several centuries to occur, but we cannot rule out rises of more than a metre by the end of this century, which would threaten the lives and livelihoods of millions of people around the world's coastlines."

Kamiar Mohaddes: whether rich or poor, all countries will suffer

Kamiar Mohaddes is an economist at the Cambridge Judge Business School at the University of Cambridge.

University of Cambridge economist Kamiar Mohaddes predicts at least 7 per cent of global GDP will disappear by 2100 because of business-as-usual carbon emissions. ( Supplied: Kamiar Mohaddes )

He co-authored a recent study that suggested at least 7 per cent of global GDP will disappear by 2100 as a result of business-as-usual carbon emissions.

This includes more than 10 per cent of incomes in developed nations including Canada, New Zealand and the United States, and a 7 per cent loss for Australia.

"In fact allowing for temperature increases to affect the variability of temperature shocks, they show that the estimated GDP per capita losses would almost double at the global level to over 13 per cent, with the income losses being more than 16 per cent for Australia and the United States," Dr Mohaddes explains.

The study found that, whether rich or poor, virtually all countries would suffer economically by 2100 without mitigation and adaptation policies.

There are several reasons why the losses estimated in his study were larger than those generally discussed in policy circles.

Firstly, he says, the frequency and severity of weather events and natural disasters depend heavily on the variability of temperatures.

"We explicitly model the variability of weather patterns, not only averages of climate variables," Dr Mohaddes explains.

He also notes that traditionally economists (such as Nordhaus) have argued that climate change affects economic activity mainly through the agricultural sector.

But he says other sectors, including forestry, fisheries, mining, construction, manufacturing, transport, communications, public utilities, wholesale trade, retail trade and services would all be hit by climate change.

Nicki Hutley: costs of climate change will be 'astronomical'

Deloitte Access Economics partner Nicki Hutley says there are all sorts of technological options available to help reduce emissions, but none of that contradicts the fact that if we get to a 4°C rise in global average temperatures there would be huge economic costs.

Deloitte Access Economics partner Nicki Hutley says if we get to a 4°C rise in average temperatures there will be huge economic costs. ( Supplied: Deloitte )

"Anyone who says a 4°C [rise] is not going to have an impact is quite frankly drinking something weird," Ms Hutley exclaims.

The Australian Business Roundtable for Disaster Resilience and Safer Communities — a group made up of community and business leaders who are working towards ensuring Australia becomes more equipped for extreme weather events — has considered the economic damage of natural disasters across states and territories.

In a 2017 report, it found that the total economic cost of natural disasters in the 10 years to 2016 averaged $18.2 billion per year, equivalent to 1.2 per cent of average gross domestic product (GDP) over the same period.

It said this was expected to reach $39.3 billion per year on average by 2050 (in present value terms), even without considering the impact of climate change (and the latest bushfires are likely to hugely inflate those estimates).

The report noted that "while the science has advanced, it remains difficult for experts to model the timing, location and intensity of disaster events in response to climate variability and change", and therefore the $39.3 billion estimate was conservative.

"This [climate change] is so multidimensional, and the costs are astronomical," Ms Hutley says.

She also points out that the IPCC itself has called on international leaders to limit global warming below or close to 1.5°C, which would require the world to cut net emissions by about half by 2030 and reach net zero by 2050.

"The idea is that we avoid getting to four degrees," she said.

John Quiggin: Economists don't look beyond tipping points

John Quiggin, an Australian Laureate Fellow in Economics at the University of Queensland, says the problem with economic models is how they treat the worst-case scenarios.

John Quiggin, from the University of Queensland, said the problem with economic models is how they treat the worst-case scenarios. ( Supplied: John Quiggin )

"A lot of attention has been paid to the lower levels of [global] warming because they are easier to evaluate," he observes.

"Once you get past tipping points, we don't really have a good handle on what may happen."

He estimates the economic cost of the latest Australian bushfires alone could hit about $100 billion.

This estimate takes into account massive underinsurance by households and businesses, damage to public infrastructure (which will have to be rebuilt to a higher standard in preparation for future disasters), lost tourism, ongoing health effects from smoke and pollution, and the destruction of entire ecosystems.

"If you look at the way economists were framing the debate, the assumption was bad things will happen around 2050, so how you discount costs and benefits 30 years into the future is a big deal," Dr Quiggin explains.

"The arrival of climate change much sooner than people expected will render the debate about the discount rate largely irrelevant. Climate change is happening now."

Another issue that has divided economists is how much it will cost to reduce emissions.

"The technological advancements we have seen mean we could decarbonise the economy very cheaply if we choose to," Dr Quiggin argues.

"But even with technological improvements, it will only happen if the policymakers want it to happen."