The White House Council of Economic Advisors has just issued its study, The Cost of Delaying of Action to Stem Cimate Change. The study argues (for illustrative purposes only) that failing to keep the future average global temperature increase below 2 degrees Celsius would result in an annual loss of 0.9 percent of GDP due to climate damage. Sounds serious, no? The study warns:
Based on a leading aggregate damage estimate in the climate economics literature, a delay that results in warming of 3° Celsius above preindustrial levels, instead of 2°, could increase economic damages by approximately 0.9 percent of global output. To put this percentage in perspective, 0.9 percent of estimated 2014 U.S. Gross Domestic Product (GDP) is approximately $150 billion. The incremental cost of an additional degree of warming beyond 3° Celsius would be even greater. Moreover, these costs are not one-time, but are rather incurred year after year because of the permanent damage caused by increased climate change resulting from the delay.
Most global temperature projections due to man-made warming do not expect average temperature to exceed 3 degrees Celsius until around 2100. So using that as a baseline (for illustrative purposes only), let's run some rough numbers to see just how bad the permanent loss of 0.9 percent per year would be in 2100.
Right now the U.S. GDP is about $17.2 trillion. Assuming a growth rate of 2.5 percent per year for the next 85 years yields a projected U.S. GDP of $140.3 trillion by 2100. So, a 0.9 percent loss per year in 2100 would mean that future GDP would instead be about $139 trillion. In other words, the GDP of the denizens of the 22nd century America would be about $1.3 trillion lower than it otherwise would have been had global average temperature been held to 2 degrees Celsius.
So how much economic growth should we be willing to sacrifice now to prevent this future loss? Put it this way, lowering the average economic growth rate from 2.5 percent to 2.489 percent over the next 85 years would result in a similar permanent annual loss of GDP by 2100.
Assuming a U.S. population of 500 milion by 2100, the intergenerational equity question is: How much should people now making an average per capita GDP of $54,000 sacrifice for people 85 years hence whose per capita GDP of around $278,000 would be a couple of thousand bucks higher if temperatures were a degree lower?
Of course, all of these calculations projecting outcomes nearly a century hence need to be taken with vats of salt.
For the record, I do think that man-made climate change is a problem, but I also think that these sorts of attempts at ginning up scary scenarios are not very persuasive.