My Puzzlement Over Climate Change Damage Estimates in New National Climate Assessment

“Mass deaths and mayhem: National Climate Assessment’s most shocking warnings,” blares the headline at CBS News. The story, which discusses the government’s Fourth National Climate Assessment (NCA4), says that the document predicts “an estimated loss of up to 10 percent gross domestic product by 2100.” This same estimate was cited by many other news outlets. For example, the first paragraph of The New York Times‘ article on the NCA4 says that “if significant steps are not taken to rein in global warming, the damage will knock as much as 10 percent off the size of the American economy by century’s end.”

Puzzled by this reporting, I did a rough calculation in my initial reporting on the NCA4. Today’s $20 trillion GDP, growing at a 3 percent rate, would rise to $226 trillion by 2100. With climate change, it would instead rise to only $203 trillion. Americans living at the end of this century would be about 10 times richer on average than we are now, albeit in a much warmer world.

So where did those estimates come from? Basically from a worst-case scenario of temperature increase called in climate-speak Representative Concentration Pathway 8.5 (RCP 8.5). RCPs are four different greenhouse gas concentration trajectories used by climate modelers and adopted by the Intergovernmental Panel on Climate Change for its fifth Assessment Report in 2014. Each makes different assumptions about population growth, economics, technological progress, and fossil fuel burning. RCP 8.5 implausibly assumes a global population of 12 billion by 2100, plus technological stagnation, slow economic growth, and consumption of fossil fuels at about 3 times current levels, with the result that atmospheric carbon dioxide concentrations reaches 950 ppm, up from 405 ppm now. In RCP 8.5, average global temperature could increase by as much as 10 degrees Fahrenheit.

Why choose to focus on the RCP 8.5? “Given this assessment’s emphasis on using a risk-based framework, authors were asked to consider low-probability, high-consequence climate futures,” explain the authors. Fair enough. But it did result in implausible doom-laden headlines.

In any case, this is the scenario that produced the NCA4 estimate of that 10 percent loss. But wait, it gets weirder. The total projected damages in this worst-case scenario add up to just over $500 billion per year in 2100 (see below). If that’s 10 percent of GDP in 2100, that suggests that U.S. GDP will be only $5 trillion dollars (75 percent lower than now). I must be missing something.

“Climate Change Is Affordable,” opines Holman Jenkins over at The Wall Street Journal after parsing these figures. And he’s not wrong, assuming these estimates are ballpark accurate.

Finally, the 10 percent GDP loss figure is apparently derived from an analysis by the Berkeley researcher Solomon Hsiang and his team published in Science in 2017. “Combined uncertainty in aggregate impacts grows with warming, so the very likely (5th to 95th percentile) range of losses at 1.5°C of warming is −0.1 to 1.7% GDP, at 4°C of warming is 1.5 to 5.6% GDP, and at 8°C warming is 6.4 to 15.7% GDP annually,” calculate the researchers. Note that the worst-case assumes an absurdly farfetched increase in average temperature of 8 degrees Celsius (14.4 degrees Fahrenheit) by the end of this century. Yet it is from this outlandish scenario that the scaremongering figure of a 10 percent lower GDP in 2100 is extracted.

Whatever the intentions of the NCA4 authors, highlighting a preposterously implausible worst-case scenario does not further the debate over reasonable policy responses to climate change.