The global economic costs of climate change inaction - Oxford Economicshttps://www.oxfordeconomics.com/resource/the-global-economic-costs-of-climate-inaction/Our new damage function redefines the BHM damage function in terms of warming (that is, the change in global average temperature relative to pre-warming levels). Through this warming definition, it considers temperature anomalies from historical norms, which we show to be more economically consequential than average temperature levels. Our new damage function also accounts for volatility and extremes of the temperature distribution. The resulting estimates show that as the global warming goes beyond its current 1.1°C, productivity growth falls faster worldwide than previously estimated.
Under this new specification, we find that 2.2°C of warming by 2050 has the potential to reduce global GDP levels by up to 20%. Warming of up to 5°C by 2100 would lead to economic annihilation, consistent with scientific research on mass extinction thresholds.
It is also important to note that this estimation suggests that cooler countries, in contrast to BHM (Chart 1), no longer benefit from modest warming. Instead, all countries see significant losses in productivity growth from additional warming (Chart 2).