Statement of Solomon Hsiang
Chancellor’s Professor of Public Policy, University of California, Berkeley
Director, Global Policy Laboratory, Goldman School of Public Policy
Co-Director, The Climate Impact Lab
To be presented to:
United States House Committee on the Budget, hearing on
“The Costs of Climate Change: Risks to the U.S. Economy and the Federal Budget”
June 10, 2019
Thank you Chairman Yarmuth, Ranking Member Womack, and members of the Committee for
inviting me to speak today.
My name is Solomon Hsiang, and I am the Chancellor’s Professor of Public Policy
at the University of California, Berkeley and currently the Kushel Visiting Scholar at Stanford
University. I was trained in both economics and climate physics at Columbia, MIT, and
Princeton. My research focuses on the use of econometrics to measure the effect of the climate
on the economy and I co-direct the Climate Impact Lab, a multi-institution effort to
systematically quantify the economic costs of climate change. I am here in my personal capacity
to describe what I believe are the most important findings in this emerging field of research.
When approaching climate change as an economic problem, we do not think about the climate
aesthetically. Instead, we think of the climate as a capital asset that generates economic value
just like any other human-made capital asset, even though we do not own or have complete
control over it. The climate generates value by improving the function and performance of all
other components of the economy, in some ways similar to how the internet or the national
highway system generate value for our economy. Because we now understand that human
actions are affecting the climate of the United States, it is in the nation’s best economic interest
that we consider whether our actions increase or decrease the value of this national asset.
Hundreds of researchers around the world are now using massive data repositories to understand
the effects of the climate, and the potential impacts of climate change, on modern society. The
last decade has seen dramatic advances in our understanding of the economic value of the
climate, driven by unprecedented access to data, computing, and methodological advances. An
important advance has been developing the ability to use real-world data to quantify how
changes in the climate cause changes in the economy. This means that in addition to being able
to project how unmitigated emission of greenhouse gasses will cause the physical climate to
change, we are now developing the ability to also estimate the subsequent impact that these
changes are likely to have on the livelihoods of Americans.
1
Modern researchers use careful analysis of detailed data to understand how various elements of
the economy respond to changes in different components of the climate. For example, an
econometrician might examine how crop yields, crop acreages, worker wages, and farm profits
1
Duffy, Philip B., et al. "Strengthened scientific support for the Endangerment Finding for atmospheric
greenhouse gases." Science 363.6427 (2019)
change as counties in Nebraska get warmer or cooler over time. These results are then used to
consider how these economic variables might change next year given the amount of climate
change that is forecast for the next year. Extending the procedure year-after-year allows us to
consider economic effects over longer time-horizons, although with increasing uncertainty. The
analyses I describe represent the best available current science, employing data and methods
developed and published in the world’s top peer-reviewed scientific and economic research
journals,
2
but there nonetheless invariably remains substantial uncertainty in many results from
this emerging field. Researchers generally spend tremendous effort meticulously tracking and
reporting sources of uncertainty in their analyses, which I will try to represent and interpret.
Because there are numerous irreducible uncertainties about the future of the global economy,
such as the pace of technological innovation, research on the economic effects of future climate
change explicitly does not attempt to forecast the future. Rather, researchers use a risk-
management framework in which they try to determine the direction and strength with which
climate changes will nudge society, relative to some baseline trajectory with “no climate
change”, and then assign probabilities to different possible outcomes. This information can then
be used to value the potential risks or rewards of pursuing different climate objectives, relative to
the baseline. Because both the baseline economic pathway and any climate change-affected
pathway both contain the same fundamental uncertainties about the future, these uncertainties do
not affect the difference in economic outcomes between these two pathways, which is the object
of interest from a risk-management standpoint. Thus, research findings in this field should be
interpreted similarly to medical recommendations regarding current behaviors that affect future
health: we cannot predict the future, but we may understand how certain actions today can
systematically increase or decrease the risk of a particular outcome in the future.
In what follows, unless otherwise specified, I will refer to the Representative Concentration
Pathway (RCP) 8.5 specified by the Climate Model Intercomparing Project 5
3
as “unmitigated
climate change,” since it is the path emissions would be expected to take if past trends continue
unabated. In general, this trajectory is usually compared to a baseline resembling the climate of
the late twentieth century.
The following are key insights from this emerging field that I believe merit your attention.
1. Unmitigated climate change is likely to have substantial net negative impact on the US
economy overall.
2
Dell, Melissa, Benjamin F. Jones, and Benjamin A. Olken. "What do we learn from the weather? The
new climate-economy literature." Journal of Economic Literature 52.3 (2014): 740-98; Carleton, Tamma,
and Solomon Hsiang. "Social and economic impacts of climate." Science 353.6304 (2016): aad9837;
Diaz, Delavane and Frances Moore "Quantifying the economic risks of climate change" Nature Climate
Change 7(11) (2017) 774-782; Auffhammer, Maximilian. "Quantifying economic damages from climate
change." Journal of Economic Perspectives 32.4 (2018): 33-52.
3
Taylor, Karl E., Ronald J. Stouffer, and Gerald A. Meehl. "An overview of CMIP5 and the experiment
design." Bulletin of the American Meteorological Society 93.4 (2012): 485-498, Hsiang, Solomon, and
Robert E. Kopp. "An Economist's Guide to Climate Change Science." Journal of Economic
Perspectives 32.4 (2018): 3-32.
2. Extreme weather events are short-lived, but their economic impact is long-lasting.
3. The nature and magnitude of projected costs differs between locations and industries.
4. Because low income regions and individuals tend to be more adversely impacted, climate
change will likely widen existing economic inequality.
5. Many impacts of climate change will not be felt in the marketplace, but rather in homes
where health, happiness, and freedom from violence will be affected.
6. Populations across the country will try to adapt to climate change at substantial cost, with
varying degrees of success.
7. Outside of the US, the global consequences of climate change are projected to be large
and destabilizing.
8. Uncertainty about the consequences of climate change itself represents a separate type of
economic harm, because it is costly to cope with.
I discuss these points below.
1. Unmitigated climate change is likely to have substantial negative impact on the US
economy.
There are two general approaches used to understand how the economic consequences of climate
change add up, often referred to as “bottom-up” and “top-down” approaches. The bottom-up
approach enumerates many effects that can each be observed, such as crop losses and health
impacts, and then integrates them to develop an overall picture of net economic consequences.
The top-down approach views the economy as a whole, bundling together those aspects of the
economy that are captured in regional and national accounting statistics, and tries to understand
how these aggregate measures will respond to climate change.
A benefit of the bottom-up approach is that it can capture many “non-market” impacts of climate
change that may be important, such as changes to human health, but which are not normally
priced into aggregate economic measures. The core drawback of the bottom-up approach is that
it is difficult to develop a complete picture of impacts, since enumerating each impact
individually and then integrating these estimates is data and labor intensive. As an example, in
one effort to integrate findings from across the literature, colleagues from several institutions,
including Rutgers University, University of Chicago, Columbia University, Princeton University,
and the Rhodium Group, computed some combined effects of climate change on agriculture,
energy, labor, health, crime, and coastal communities.
4
This analysis estimated that economic
damage from warming was quadratic in global mean temperature, but each 1°C increase cost the
US roughly 1.2% of GDP in aggregate—although this analysis omitted many known impacts,
4
Houser, Trevor, et al. Economic risks of climate change: an American prospectus. Columbia University
Press, 2015; Hsiang, Solomon, Robert Kopp, Amir Jina, James Rising, et al. "Estimating economic
damage from climate change in the United States." Science 356.6345 (2017): 1362-1369.
did not model future unprecedented adaptations, and assumed the structure of the economy
remained fixed. This analysis also did not compute the stream of damages and thus did not report
a net present value for these costs. Continued work with my colleagues at the Climate Impact
Lab is improving upon this original work and addressing these issues. In a different recent effort,
using a different modeling approach, researchers at the Environmental Protection Agency
analyzed 22 sectors at high spatial resolution and found that all regions of the country suffered
substantial costs from unmitigated climate change, but they also did not report net present value
estimates of total projected losses.
5
A benefit of the alternative top-down approach is that it captures many elements of the market
economy more completely than the bottom-up approach, since it captures all elements of the
economy described by national accounting statistics. Another benefit is that, under certain
conditions and methods of implementation, it can be understood to broadly capture the costs and
benefits of adaptation to climate change.
6
A drawback is that this approach may miss many
impacts that are important but are not counted in national accounts, like human health. As an
example, in a detailed analysis of county level productivity data, Tatyana Deryugina at the
University of Illinois, Urbana-Champaign and I estimate that the direct thermal effects of
warming would reduce incomes nation-wide over the next 80 years, a loss valued at roughly
$4.7-10.4 trillion (90% confidence interval) in net present value
7
using a 3% discount rate.
Similar findings have since been replicated by researchers at the Federal Reserve Bank of
Richmond, the Inter-American Development Bank, and the University of North Carolina using
state-level data
8
and researchers at Stanford University using MSA-level data.
9
In another
example, Amir Jina at the University of Chicago and I compute that foregone earnings, due to
intensified hurricanes that lower economic growth, are valued at roughly $0.4-1.3 trillion (95%
confidence interval) in net present value
10
using a 5% discount rate. Similar findings have since
been replicated by researchers at Brown University and the University of Arizona,
11
as well as
by researcher at the International Monetary Fund.
12
Importantly, all of these estimates are known not to be a complete accounting of impacts and
should be interpreted with caution. In particular, impacts after 2100 are generally omitted
entirely. Nonetheless, these estimates provide a sense of scale and scope for the likely potential
impact that climate change might be expected to have on the US economy.
5
Martinich, Jeremy, and Allison Crimmins. "Climate damages and adaptation potential across diverse
sectors of the United States." Nature climate change 9.5 (2019): 397.
6
Hsiang, Solomon. "Climate econometrics." Annual Review of Resource Economics 8 (2016): 43-75.
7
Deryugina, Tatyana, and Solomon Hsiang. The marginal product of climate. No. w24072. National
Bureau of Economic Research, 2017.
8
Colacito, Ric, Bridget Hoffmann, and Toan Phan. "Temperatures and growth: A panel analysis of the
United States." Journal of Money, Credit, and Banking, (Forthcoming).
9
Burke, Marshall, and Vincent Tanutama. Climatic Constraints on Aggregate Economic Output. No.
w25779. National Bureau of Economic Research, 2019.
10
Hsiang, Solomon, and Amir S. Jina. The causal effect of environmental catastrophe on long-run
economic growth: Evidence from 6,700 cyclones. No. w20352. National Bureau of Economic Research,
2014.
11
Bakkensen, Laura, and Lint Barrage. Climate shocks, cyclones, and economic growth: bridging the
micro-macro gap. No. w24893. National Bureau of Economic Research, 2018.
12
International Monetary Fund. “Chapter 3: The Effects of Weather Shocks on Economic Activity: How
Can Low-Income Countries Cope?” in World Economic Outlook, October 2017
2. Extreme weather events are short-lived, but their economic impact is long-lasting.
Hurricanes, floods, tornados, droughts, and fires destroy assets that took communities years to
build. Efforts to rebuild then diverts resources away from new productive investments that
would have otherwise supported future economic growth.
13
For example, Trevor Houser at the
Rhodium Group, Amir Jina at the University of Chicago, and I estimated that Hurricane Maria
set Puerto Rico back over two decades of progress
14
; and research by Richard Hornbeck at the
University of Chicago indicates that communities in the Great Plains have still not fully
recovered from the Dustbowl of the 1930s.
15
Climate change is likely to make many types of
extreme events more intense and/or more frequent, forcing us to spend a larger fraction of our
attention and revenues on rebuilding depreciated assets and repairing communities. In addition,
general equilibrium simulations suggest that accelerating depreciation rates in one region would
necessarily raise capital costs for all industries and consumers across the nation, thereby further
slowing growth and magnifying the economic impact of extreme events.
16
3. The nature and magnitude of projected costs differs between locations and industries.
Early economic models of climate change could not resolve impacts at scales finer than the
country, but recent research using spatially granular data has revealed that impacts differ
dramatically by location. This occurs for a variety of reasons. First, the physical changes
projected for different locations may differ, even within a single scenario. Second, the mix of
industries that are present varies across locations, and each industry exhibits different responses
to climate change. Third, different populations may respond differently to the same climatic
stress when participating in the same industry because they have different abilities to cope with
these stresses, perhaps because they have differential access to resources or technologies.
17
Fourth, many impacts of climate change are nonlinear, so the baseline climate of a location
strongly influences the impact of changing that climate.
18
This results in a diversity of projected
costs that are highly specific to locations and industries, and it suggests that focusing too heavily
on nationally aggregated total costs will miss much of what we think are important consequences
13
Hsiang, Solomon M., and Amir S. Jina. "Geography, depreciation, and growth." American Economic
Review 105.5 (2015): 252-56.
14
Hsiang, Solomon and Trevor Houser: "Don’t Let Puerto Rico Fall Into an Economic Abyss," New York
Times, September 29, 2017
15
Hornbeck, Richard. "The enduring impact of the American Dust Bowl: Short-and long-run adjustments
to environmental catastrophe." American Economic Review 102.4 (2012): 1477-1507.
16
Hsiang, Solomon, Robert Kopp, Amir Jina, James Rising, et al. "Estimating economic damage from
climate change in the United States." Science 356.6345 (2017): 1362-1369.
17
Hsiang, Solomon M., and Daiju Narita. "Adaptation to cyclone risk: Evidence from the global cross-
section." Climate Change Economics 3.02 (2012): 1250011. Barreca, Alan, et al. "Adapting to climate
change: The remarkable decline in the US temperature-mortality relationship over the twentieth
century." Journal of Political Economy 124.1 (2016): 105-159.
18
Schlenker, Wolfram, and Michael J. Roberts. "Nonlinear temperature effects indicate severe damages
to US crop yields under climate change." Proceedings of the National Academy of sciences 106.37
(2009): 15594-15598; Burke, Marshall, Solomon M. Hsiang, and Edward Miguel. "Global non-linear effect
of temperature on economic production." Nature 527.7577 (2015): 235.;
of warming. For example, extreme heat will impose large health, energy, and labor costs on the
South; sea level rise and hurricanes will damage coastal communities, particularly Florida;
humidity levels similar to those of modern Louisiana will force a restructuring of infrastructure
in New England; declining crop productivities will transform land markets throughout the Plains
and Midwest; and more frequent fires and water shortages will harm the West.
19
4. Because low income regions and individuals tend to be more adversely impacted,
climate change will widen existing economic inequality.
Research indicates that low-income individuals tend to bear greater cost than wealthier
individuals when both are subject to the same climatic stress.
20
In addition, many locations that
are poorer today are projected to experience greater economic harms. For example, rural counties
are projected to generally suffer larger losses than urban counties because agricultural industries
are highly sensitive to climate,
21
and many locations that are projected to suffer relatively more
from extreme heat and coastal impacts tend to have lower income today. For example, in a
national analysis of many sectors, the poorest decile of counties suffered median losses that were
9.5 times larger than the richest decile of counties, when losses are measured as a percentage of
baseline income.
22
5. Many impacts of climate change will not be felt in the marketplace, but rather in homes
where health, happiness, and freedom from violence will be affected.
Market-based measures do not fully capture many elements of wellbeing, economic opportunity,
and quality of life that are projected to be affected by climate change. There are many important
examples of this from recent research. Mortality rates in hot regions are projected to rise, by over
20 deaths per 100,000 per year (central estimate) in states like Texas and Oklahoma, due to
extreme heat and vector-borne diseases
23
. Growing numbers of hot summer days are projected to
degrade population-level measures of sleep quality
24
and happiness—for example, one detailed
analysis of social media behavior indicates that unmitigated warming could lower happiness in
the Great Lakes Region by roughly the same amount as would be predicted by turning half of
19
Hsiang, Solomon, Robert Kopp, Amir Jina, James Rising, et al. "Estimating economic damage from
climate change in the United States." Science 356.6345 (2017): 1362-1369; Martinich, Jeremy, and
Allison Crimmins. "Climate damages and adaptation potential across diverse sectors of the United
States." Nature climate change 9.5 (2019): 397.
20
Hsiang, Solomon, Paulina Oliva, and Reed Walker. "The distribution of environmental
damages." Review of Environmental Economics and Policy 13.1 (2019): 83-103.
21
Deryugina, Tatyana, and Solomon Hsiang. The marginal product of climate. No. w24072. National
Bureau of Economic Research, 2017.
22
Hsiang, Solomon, Robert Kopp, Amir Jina, James Rising, et al. "Estimating economic damage from
climate change in the United States." Science 356.6345 (2017): 1362-1369.
23
US Global Change Research Program. “The Impacts of Climate Change on Human Health in the
United States: a Scientific Assessment” (2016); Hsiang, Solomon, Robert Kopp, Amir Jina, James Rising,
et al. "Estimating economic damage from climate change in the United States." Science 356.6345 (2017):
1362-1369.
24
Obradovich, Nick, et al. "Nighttime temperature and human sleep loss in a changing climate." Science
advances 3.5 (2017): e1601555.
Sundays into work days (i.e. Mondays) each year.
25
Such changes in mental wellbeing matter
themselves and also have acute impacts. An analysis of FBI crime data projects warming to
elevate violent crime across the country, producing an additional 100,000-260,000 sexual
assaults and 12,000-33,000 murders (95% confidence intervals) over the next eighty years.
26
In
an analysis of CDC data, Marshall Burke at Stanford University, along with colleagues and
myself, estimate that unmitigated warming would be very likely to generate between 5,600-
26,000 additional suicides (95% confidence interval) over the next thirty years, across the
country.
27
Analyses of Census data indicate that increasing exposure of pregnant mothers to
extreme heat or hurricane harms fetuses for their lifetimes such that, at age thirty, the child
performs measurably worse in the labor market.
28
Many of these impacts of climate change do
not easily convert to dollars and cents, but they nonetheless merit consideration in any discussion
of climate change costs.
6. Populations across the country will try to adapt to climate change at substantial cost,
with varying degrees of success.
It has long been understood that many populations and communities will try to adapt to climate
changes,
29
although the overall effectiveness of this adaptation, in terms of costs and benefits, is
unclear and remains an area of active research. Households may transform how or where they
live, for example, by switching jobs to a new industry or permanently moving their family to less
affected areas, as has been observed during recent Corn Belt droughts
30
and following Hurricane
Katrina.
31
These adjustments will have benefits and costs to the adapting household that is
adapting, and they may also generate smaller but widespread costs for other households that are
not adapting (externalities). For example, industry-switching and migration may induce
crowding in the receiving industries or locations, lowering wages and raising home prices,
respectively, for individuals already in those industries or locations.
32
25
Baylis, Patrick. "Temperature and Temperament: Evidence from a Billion Tweets." (2017). Energy
Institute Working Paper.
26
Ranson, Matthew. "Crime, weather, and climate change." Journal of environmental economics and
management 67.3 (2014): 274-302.
27
Burke, Marshall, et al. "Higher temperatures increase suicide rates in the United States and
Mexico." Nature climate change 8.8 (2018): 723.
28
Isen, Adam, Maya Rossin-Slater, and Reed Walker. "Relationship between season of birth,
temperature exposure, and later life wellbeing." Proceedings of the National Academy of Sciences 114.51
(2017): 13447-13452; Karbownik, Krzysztof, and Anthony Wray. "Long-run consequences of exposure to
natural disasters." Journal of Labor Economics 37.3 (2019).
29
Mendelsohn, Robert. "Efficient adaptation to climate change." Climatic Change 45.3-4 (2000): 583-600.
30
Feng, Shuaizhang, Michael Oppenheimer, and Wolfram Schlenker. Climate change, crop yields, and
internal migration in the United States. No. w17734. National Bureau of Economic Research, 2012.
31
Vigdor, Jacob. "The economic aftermath of Hurricane Katrina." Journal of Economic Perspectives 22.4
(2008): 135-54.
32
Belasen, Ariel R., and Solomon W. Polachek. "How hurricanes affect wages and employment in local
labor markets." American Economic Review 98.2 (2008): 49-53; Strobl, Eric. "The economic growth
impact of hurricanes: evidence from US coastal counties." Review of Economics and Statistics 93.2
(2011): 575-589.
An alternative approach to adapting will involve households and communities making costly
defensive investments, such as building sea walls to protect coastal cities,
33
expanding use of
irrigation in agriculture,
34
purchasing more weather-related insurance for all industries and
homes,
35
fortifying flood-exposed infrastructure,
36
and building more power plants to support
expanded air conditioning usage.
37
Given currently available technology, we should expect that
many of these defensive investments will partially protect families, communities, and industries
from some aspects of climate change. We should also expect that deployment, operation, and
maintenance of these defensive investments will come at a cost, since resources allocated
towards these adaptations would, in the absence of climate change, have otherwise been invested
in productive activities or consumed to improve standards of living. In many cases, these costs
will likely generate “adaptation gaps” where best-available technologies are not actually adopted
by many populations.
38
It is crucial when considering adaptation to climate change that both the
benefits and costs of adaptation are accounted for on equal footing. Presenting only one or the
other will produce a one-sided, and fundamentally inaccurate, accounting of the economic costs
of climate change.
It is sometimes hypothesized that technological innovation will substantially aid our ability to
adapt in the future, by either expanding the range of potential coping strategies or lowering the
cost of existing strategies.
39
While this is almost guaranteed to occur in at least some contexts, it
is unknowable how widespread this phenomenon is likely to be. Thus, relying heavily on
unknown future innovation would be a form of gambling, from an economic standpoint, since
risks cannot be calculated. However, ignoring the potential for future innovation is also
unwarranted. For perspective, note that some historical innovations have substantially altered
climate impacts in meaningful ways, while others, long-promised, never materialized. For
example, widespread adoption of air-conditioning in the 1960’s and 70’s substantially reduced
heat-related mortality
40
, although heat-related productivity losses have persisted.
41
Meanwhile,
33
Neumann, James et al. “The economics of adaptation along developed coastlines” WIRES Climate
Change (2010); Diaz, Delavane B. "Estimating global damages from sea level rise with the Coastal
Impact and Adaptation Model (CIAM)." Climatic change 137.1-2 (2016): 143-156.
34
Hanson, R. T., et al. "A method for physically based model analysis of conjunctive use in response to
potential climate changes." Water Resources Research 48.6 (2012); Hornbeck, Richard, and Pinar
Keskin. "The historically evolving impact of the ogallala aquifer: Agricultural adaptation to groundwater
and drought." American Economic Journal: Applied Economics 6.1 (2014): 190-219.
35
Congressional Budget Office, “Expected Costs of Damage From Hurriance Winds and Storm-Related
Flooding, June, 2016
36
Congressional Budget Office. “Potential Increases in Hurricane Damage in the United States:
Implications for the Federal Budget,” April, 2019
37
Auffhammer, Maximilian, Patrick Baylis, and Catherine H. Hausman. "Climate change is projected to
have severe impacts on the frequency and intensity of peak electricity demand across the United
States." Proceedings of the National Academy of Sciences 114.8 (2017): 1886-1891.
38
Carleton, Tamma A., and Solomon M. Hsiang. "Social and economic impacts of
climate." Science 353.6304 (2016): aad9837.
39
Acemoglu, Daron, et al. "The environment and directed technical change." American economic
review 102.1 (2012): 131-66.
40
Barreca, Alan, et al. "Adapting to climate change: The remarkable decline in the US temperature-
mortality relationship over the twentieth century." Journal of Political Economy 124.1 (2016): 105-159.
41
Deryugina, Tatyana, and Solomon Hsiang. The marginal product of climate. No. w24072. National
Bureau of Economic Research, 2017.
high-yielding heat-tolerant crop varieties have remained elusive,
42
despite decades of optimism
and effort by breeders. Some innovations will likely enable adaptations that help some
individuals while harming others, for example further automation of manufacturing may make
industry more heat resilient but may reduce employment. Additionally, it should be noted that,
similar to all other forms of adaptation, technological innovations also come at a cost (research
and development), but unlike other forms of adaptation, these costs are paid by society up front
regardless of whether or not efforts to innovate are successful.
7. Outside of the US, the global consequences of climate change are projected to be large
and destabilizing.
In addition to substantially altering the structure and productivity of the US economy, research
indicates that unmitigated climate change will likely have remarkable international
consequences. Similar to the US, economic productivity around the world tends to decline with
rising temperatures,
43
rainfall shortages
44
, and more frequent tropical cyclones
45
. For example,
Marshall Burke at Stanford University, Edward Miguel at University of California, Berkeley,
and I estimated that the thermal effects of unmitigated warming could be expected to
substantially slow global economic growth,
46
by roughly 0.28 percentage points (central
estimate), on average, throughout the next eighty years
47
—although there is a large degree of
uncertainty in these estimates. Food security and social and political stability throughout the
tropics and subtropics are also projected to decline substantially.
48
These effects are likely to be
felt in the US through their impact on financial markets
49
, continuous adjustments in the global
42
Roberts, Michael J., and Wolfram Schlenker. "The evolution of heat tolerance of corn: Implications for
climate change." The economics of climate change: adaptations past and present. University of Chicago
Press, 2011. 225-251. Lobell, David B., et al. "Greater sensitivity to drought accompanies maize yield
increase in the US Midwest." Science 344.6183 (2014): 516-519.
43
Hsiang, Solomon M. "Temperatures and cyclones strongly associated with economic production in the
Caribbean and Central America." Proceedings of the National Academy of sciences 107.35 (2010):
15367-15372; Dell, Melissa, Benjamin F. Jones, and Benjamin A. Olken. "Temperature shocks and
economic growth: Evidence from the last half century." American Economic Journal: Macroeconomics 4.3
(2012): 66-95; Burke, Marshall, Solomon M. Hsiang, and Edward Miguel. "Global non-linear effect of
temperature on economic production." Nature 527.7577 (2015): 235.
44
Barrios, Salvador et al. "Trends in rainfall and economic growth in Africa: A neglected cause of the
African growth tragedy." The Review of Economics and Statistics 92.2 (2010): 350-366.
45
Hsiang, Solomon M., and Amir S. Jina. The causal effect of environmental catastrophe on long-run
economic growth: Evidence from 6,700 cyclones. No. w20352. National Bureau of Economic Research,
2014; International Monetary Fund. “Chapter 3: The Effects of Weather Shocks on Economic Activity:
How Can Low-Income Countries Cope?” in World Economic Outlook, October 2017.
46
Burke, Marshall, Solomon M. Hsiang, and Edward Miguel. "Global non-linear effect of temperature on
economic production." Nature 527.7577 (2015): 235.
47
Carleton, Tamma A., and Solomon M. Hsiang. "Social and economic impacts of
climate." Science 353.6304 (2016): aad9837.
48
Schlenker, Wolfram, and David B. Lobell. "Robust negative impacts of climate change on African
agriculture." Environmental Research Letters 5.1 (2010): 014010. Burke, Marshall, Solomon M. Hsiang,
and Edward Miguel. "Climate and conflict." Annu. Rev. Econ. 7.1 (2015): 577-617.
49
Schlenker, Wolfram, and Charles A. Taylor. Market Expectations About Climate Change. No. w25554.
National Bureau of Economic Research, 2019.
trading system,
50
and increased migration pressure from both economic migrants
51
and asylum
seekers escaping political violence.
52
8. Uncertainty about the consequences of climate change itself represents a separate type
of economic harm, because it is costly to cope with.
Uncertainty about the potential magnitude and impact of climate change is sometimes referenced
as a reason to slow policies that mitigate greenhouse gas emissions, but this “wait and see”
strategy is difficult to justify with economic reasoning. Without question, there remains
significant uncertainty about the magnitude of warming and its consequences, with roughly half
of this uncertainty coming from indecision among policy-makers regarding emissions policies.
53
Economic theory is quite clear that this substantial uncertainty should amplify, rather than
diminish, our valuation of the potential future impacts I have described.
54
Similar to how volatile
stocks are less valuable to investors than predictable ones, a future made more uncertain due to
warming is less valuable to us, relative to a more predictable alternative.
It is also important to note that there are many dimensions of climate change that still have
unknown economic consequences. For example, scientific research indicates that unmitigated
emissions will transform natural ecosystems, make the oceans more acidic, and cause substantial
permafrost melt. While many of these physical and ecological changes are understood, their
effect on human wellbeing and economic opportunity has not been well measured. These are
critical areas of ongoing research.
Finally, many economists have considered how we should price potential “tipping points” in
which irreversible regime shifts in the global climate cause extreme and unprecedented economic
damage, such as abrupt sea level rise.
55
This line of research is more theoretical in nature, since
there are no relevant modern example events for economists to study. In general, the possibility
that such tipping points might have greater likelihood due to rising greenhouse gas emissions
means that a rational, risk-averse economic decision-maker should invest greater resources in
50
Jones, Benjamin F., and Benjamin A. Olken. "Climate shocks and exports." American Economic
Review 100.2 (2010): 454-59; Costinot, Arnaud, Dave Donaldson, and Cory Smith. "Evolving comparative
advantage and the impact of climate change in agricultural markets: Evidence from 1.7 million fields
around the world." Journal of Political Economy 124.1 (2016): 205-248.; Dingel, Jonathan I., Kyle C.
Meng, and Solomon M. Hsiang. Spatial Correlation, Trade, and Inequality: Evidence from the Global
Climate. No. w25447. National Bureau of Economic Research, 2019.
51
Feng, Shuaizhang, Alan B. Krueger, and Michael Oppenheimer. "Linkages among climate change, crop
yields and Mexico–US cross-border migration." Proceedings of the National Academy of Sciences 107.32
(2010): 14257-14262; Cattaneo, Cristina, and Giovanni Peri. "The migration response to increasing
temperatures." Journal of Development Economics 122 (2016): 127-146.
52
Missirian, Anouch, and Wolfram Schlenker. "Asylum applications respond to temperature
fluctuations." Science358.6370 (2017): 1610-1614.
53
Solomon, and Robert E. Kopp. "An Economist's Guide to Climate Change Science." Journal of
Economic Perspectives 32.4 (2018): 3-32.
54
Lemoine, The Climate Risk Premium: How Uncertainty Affects the Social Cost of Carbon, JAERE
(forthcoming); Cai, Yongyang, Thomas Lontzek The social cost of carbon with economic and climate
risks Journal of Political Economy (forthcoming)
55
Bamber, Jonathan L., et al. "Ice sheet contributions to future sea-level rise from structured expert
judgment." Proceedings of the National Academy of Sciences 116.23 (2019): 11195-11200.
mitigating those emissions, since there is are not other means to insure or otherwise hedge
against such events.
56
Such extreme scenarios may not be visible in recent history nor
necessarily likely in the future, but they should nonetheless be carefully considered. Simple
dismissal of this concern should be tempered by the numerous historical examples
57
of
civilizations with unprecedented technological-prowess collapsing under climatic stresses far
gentler than what is projected in the next two centuries.
Conclusions
Newly available data and computing empower us have a scientifically-informed dialogue about
the ways our actions today will shape the economic environment in which centuries of our
descendants will earn their living and raise their families. To my knowledge, this is the first time
in human history that such conversations have taken place.
Global efforts in an emerging research field are working vigorously to understand the economic
and social consequences of climate change. Insights from this research reveal that the potential
costs to the US economy are complex, diverse, and sizable, but this economic future is not
locked in. All of the potential risks I have identified here are substantially mitigated by reducing
greenhouse gas emissions both in the US and around the world.
The available evidence indicate that our climate may be one of the nation’s most important
economic assets. I believe it is in our nation’s best interest to manage it with the seriousness and
clarity of thought that we would apply to managing any other asset that also generates trillions of
dollars in value for the American people.
56
Weitzman, Martin L. "On modeling and interpreting the economics of catastrophic climate change." The
Review of Economics and Statistics 91.1 (2009): 1-19; Lemoine, Derek, and Christian Traeger. "Watch
your step: optimal policy in a tipping climate." American Economic Journal: Economic Policy 6.1 (2014):
137-66.
57
DeMenocal, Peter B. "Cultural responses to climate change during the late Holocene." Science (2001):
667-673; Hsiang, Solomon M., Marshall Burke, and Edward Miguel. "Quantifying the influence of climate
on human conflict." Science 341.6151 (2013): 1235367.
