lecture 18 economics of climate change

• Climate change will have many different effects that will impact the economy
• Costs of mitigating climate change vs. costs of not mitigating climate change
• The changing climate is already affecting the economy
• Estimates of economic losses from climate change usually underestimate the actual losses
• The economic impacts of climate change depend strongly on future emission scenarios
• Impacts of climate change on the economy

  • Negative effects (in red)
  • Positive effects (in blue)
• More intense hurricanes


  Cause more damage
• More people living in hurricane-prone areas increases hurricane damage costs
• Reason hurricanes are expensive

  • Repairing damage is very costly
  • Money spent on rebuilding could have been used for other purposes
• Hurricane Harvey caused used car prices to spike in Houston
• Residential, commercial, and industrial properties are vulnerable to sea level rise
• Sea level rise will cause over $1 billion in property losses in some areas
• Increased temperatures


  Lead to higher energy use and costs for cooling
• Reductions in heating costs are more than offset by increases in cooling costs
• Phoenix, Arizona has seen a record number of 100+ degree days in 2020
• The economic impacts of climate change are not limited to the US, they are a global issue
• Phoenix, Arizona has seen a large increase in the number of 100 degree plus days, from an average of 110 days to 142 days in 2020, exceeding the previous record of 143 days
• The increase in hot days in Phoenix leads to higher energy use for cooling
• Organisms, including humans, use more water when it's hot
• Water availability is going down as more water evaporates from sources like reservoirs when it's hotter
• Climate change will result in shifts in agricultural areas, with some regions seeing gains in yield while others see losses
• Extreme weather events like the "derecho" wind storm in Iowa can destroy agricultural production
• Even the best-case projections for agricultural yield changes show only a 45% increase, while the worst-case shows a 90% decrease
• Climate change will negatively impact winter sports, freshwater fishing, and tourism in many regions
• The economic impacts of climate change are projected to be greater globally, especially in countries closer to the equator, compared to just the United States
• Most economists agree that the cost of action to reduce climate change is less than the cost of inaction and the resulting damages