Quantifying Economic Damages from Climate Change

By M. Auffhammer. Journal of Economic Perspectives, 2018

372 citations recorded by the source corpus.

Climate scientists have spent billions of dollars and eons of supercomputer time studying how increased concentrations of greenhouse gases and changes in the reflectivity of the earth’s surface affect dimensions of the climate system relevant to human society: surface temperature, precipitation, humidity, and sea levels. Recent incarnations of physical climate models have become sophisticated enough to be able to simulate intensities and frequencies of some extreme events, like tropical storms, under different warming scenarios. In a stark juxtaposition, the efforts involved in and the public resources targeted at understanding how these physical changes translate into economic impacts are disproportionately smaller, with most of the major models being developed and maintained with little to no public funding support. The goal of this paper is first to shed light on how (mostly) economists have gone about calculating the “social cost of carbon” for regulatory purposes and to provide an overview of the past and currently used estimates. In the second part, I will focus on where empirical economists may have the highest value added in this enterprise: specifically, the calibration and estimation of economic damage functions, which map weather patterns transformed by climate change into economic benefits and damages. A broad variety of econometric methods have recently been used to parameterize the dose (climate) response (economic outcome) functions. The paper seeks to provide an accessible and comprehensive overview of how economists think about parameterizing damage functions and quantifying the economic damages of climate change.

Subfields: Economics and Econometrics, Global and Planetary Change, Soil Science

View Paper: https://www.semanticscholar.org/paper/58240c20d0217acdf684c27cb60311f34c8419b1

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Citations in the corpus

Climate economics support for the UN climate targets (2020, background): “Since the first attempts to estimate economic damages for different temperature levels 4,9,42-44 , methodologies have improved, but key challenges remain 45 .”
Climate Change and Adaptation in Global Supply-Chain Networks (2019, methodology): “Following the literature (e.g. Dell, Jones, and Olken, 2014; Burke, Hsiang, and Miguel, 2015a; Carleton and Hsiang, 2016; Auffhammer, 2018), we construct location-specific measures of heat and flood exposure for our sample of suppliers based on daily temperatures and inundation records”
The impact of climate conditions on economic production. Evidence from a global panel of regions (2020, background): “…new ‘hybrid’ approaches have been proposed that seek to exploit different sources of variation in panel data with the aim of estimating climate damages while still controlling for unobservable confounding variables (see Kolstad and Moore (2019) or Auffhammer (2018) for a thorough discussion).”
The Economic Geography of Global Warming (2021, background): “…on amenities and productivity explicitly controls for migration, trade, and innovation as long-run adaptation mechanisms, and it estimates the effects non-parametrically by temperature bin, it represents a new approach within the Climate Adaptive Response Estimation literature (Auffhammer, 2018).”
The GDP-Temperature relationship: Implications for climate change damages (2021, positive): “The micro-foundations literature has largely related temperature to levels of economic outcomes, not their growth (Dell et al. 2012; Schlenker and Roberts 2009; Schlenker and Auffhammer 2018; Auffhammer 2018).”