The Demos think tank, which aims to enhance democracy and "elevate the values of community and racial equity," has just released an alarming report that argues that climate change will deprive millennials and those born after 2015 of massive amounts of income and wealth over the course of this century. The report, The Price Tag of Being Young: Climate Change and Millennials Economic Future, calculates that 21 year-old Millennial college graduates earning a median income will lose $126,000 in lifetime income, and $187,000 in wealth if no action is taken to slow and stop man-made climate change. Non-college graduates will lose $100,000 in lifetime income, and $142,000 in wealth.
That's bad enough, but the kids of Millennials will do much worse. Unabated climate change will reduce median incomes and wealth of children born in 2015 who do not go to college by $357,000 in lifetime income and $581,000 in wealth. The college-educated children of Millennials will supposedly lose $467,000 in lifetime income, and $764,000 in wealth.
The Demos analysis compares these climate change lifetime earnings losses to those associated with college debt ($113,000) and the Great Recession ($112,000). Sounds really bad, right? Digging into the calculations, Demos uses the worst-case projection of greenhouse emissions, known in the climate trade as Representative Concentration Pathway 8.5 in which CO2 in the atmophere rises from about 400 to 1313 parts per million. Essentially no efforts at all will be taken to reduce emissions by 2100.
The Environment Directorate at the Organisation for Economic Co-operation and Development has devised five shared socioeconomic pathways (SSPs) that outline how the world's economy might develop by 2100. The SSPs include scenarios for population, economic, energy use, and greenhouse gas emissions growth. Very interstingly, the Demos study selects the SSP5 scenario which features the highest economic growth, the lowest population growth, and no greenhouse emissions abatement. As I report in my book, The End of Doom:
In the SSP5 "conventional development" scenario, the world economy grows flat out, which "leads to an energy system dominated by fossil fuels, resulting in high GHG emissions and challenges to mitigation." Because there is more urbanization and because there are higher levels of education, world population peaks at 8.6 billion in 2055 and will have fallen to 7.4 billion by 2100. The world's economy will grow fifteen-fold to just over $1 quadrillion, and the average person in 2100 will be earning about $138,000 per year. US annual incomes would exceed $187,000 per capita.
Demos uses only wages, not personal income in its calculations. Nevertheless, for a rough calculation as a comparison, let's assume the U.S. per capita SSP5 income of $187,000 with a working lifetime of 44 years (age 21-65 years). That yields an average per capita lifetime income exceeding $8.2 million. The SSP5 analysis takes into account the costs of adaptation to a hotter world, but the Demos analysts are not satisfied with that. So they cite a 2015 study in Nature that suggests that unmitigated warming would reduce incomes by 23 percent by 2100. In other words, they take an already worst-case warming scenario and make it even worse.
Even with that additional thumb on the climate change scales, average U.S. per capita lifetime income would be $6.3 million by 2100. For comparison, multiplying the current U.S per capita GDP of $56,000 by a working lifetime produces an total income of just under $2.5 million.
What would happen if the world were to pursue the greatest efforts at cutting greenhouse gases under the SSP1 sustainability scenario. Surely this would be the preferred scenario for the Demos folks. In that case, global GDP would be just a bit more than half of the SSP5 scenario. U.S. GDP per capita in 2100 in the SSP1 sustainability scenario would be about $90,000. Over the course of a working lifetime that would add up to just under $4 million. In other words, about half of what incomes would be in a hotter, but the much richer SSP5 world.
Of course, the Demos analysts and I are both assuming here that the risks of truly catastrophic consequences from future man-made warming are negligible. That's a discussion for another time.