Too hot to grow: how global warming can make the world enter into structural economic recession
Résumé
The ongoing climate change will have significant impacts on the Earth system, such as increasing global average surface temperature, sea-level rise, more frequent extreme weather events and large reductions in biodiversity.
There is, however, considerable debate about its actual impact on human societies, and notably on the world economy. Most neoclassical economic studies indeed predict relatively minor reductions of the usable total economic output and, most notably, that climate change will have nearly no effect on the growth rate of the global economy. This turned out to be controversial, especially since these works have been used as a basis for policy-making.
As part of its work on quantifying hard limits for the long-term future, Zenon Research introduces a new, simple model that illustrates the possible impact of global warming on the world GDP annual growth rate rather than on its total value.
Within this framework, we show that there is a threshold where heat stress would become so great that it would cancel any further economic growth. We estimate that this threshold may be reached between 3 and 5 °C above preindustrial levels. This implies that on the world’s current weak mitigation trajectory, a structural recession due to climate change cannot be ruled out by the end of this century.