Global warming: what impact on growth?

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Note and update (03/25/23)

This article benefited from the proofreading and comments of Jean-Marc Béguin (see the list of all TOE contributors).

In this fact sheet we use the 2016 version of the DICE model, for which William Nordhaus was awarded the 2018 Nobel Prize in Economics.

Since then, a new version of this model has been published: DICE-2023. The assessment of damages does not change fundamentally. Nordhaus writes: “Taking into account all these adjustments, damages are estimated at around 3.12% of GDP in the case of a global warming of 3°C compared to pre-industrial temperatures, and at 12.5% of GDP in the case of a warming of 6°C”. ¹

What are the impacts of climate change on human societies and the economy?

Studying the impacts of climate change involves a wide range of research topics and disciplines

For example, the researchers studied the consequences of different climate change scenarios on :

• natural systems (dangers for terrestrial, freshwater, coastal and deep-sea marine ecosystems, impacts on animal and plant species in terms of their ability to adapt, migrate and survive, etc.);
• food production (crop yields, livestock health, fishing and aquaculture yields) and the availability of drinking water (melting of the continental glaciers that feed the planet’s major rivers, changes in rainfall patterns);
• health impacts (nutrition, hyperthermia, increased range of certain diseases and emergence of new viruses, mental disorders);
• rising sea levels, the frequency of extreme events (storms, heat waves, floods), the disappearance of land (islands and coastal areas) and the destruction of human structures (buildings, infrastructure, factories);
• impacts on specific economic sectors (agriculture, tourism, energy or water production, disruption of global supply chains, etc.) and on the economy as a whole (measured by loss of GDP);

The research also looks at the impact of all the above in terms of migration and the stability of political regimes, and even geopolitical conflicts and wars.

These areas of research may concern the world as a whole or specific regions.

Climate change could make our planet largely uninhabitable

The analysis and synthesis of all this research work is published in the IPCC Working Group 2 assessment report, the latest version of which was published in February 2022 ” Climate Change 2022: Impacts, Adaptation and Vulnerability “.

The findings of the latest IPCC report are unequivocal: ongoing climate change has already had a major impact on natural and human systems.

More than half of humanity is now highly vulnerable to climate change.

In France, the Ministry of Ecology estimates that 62% of the population is “strongly or very strongly” exposed to climate risks.³.

Without far-reaching action to limit global warming and adapt our societies to the changes already underway, the impacts will only increase, to the point of calling into question the habitability of our planet.

This is illustrated, for example, by the following map.

As can be seen, the RCP8.5 scenario ⁴ scenario (which leads to warming in excess of 3.2°C) implies that a large part of the planet will be largely uninhabitable by 2100 (all the purple lands in the bottom right-hand planisphere).

Billions of people are affected (India, Central and Northern South America, large parts of Africa, Southeast Asia and Oceania).

These results merely confirm those of previous IPCC reports.

To avoid these extreme risks, the international community adopted the goal of limiting ” the rise in global average temperature to well below 2°C above pre-industrial levels ” in the Paris Agreement adopted at COP21 in 2015.

For some economists, the impact of global warming on world GDP is negligible.

When the IPCC transcribes the work of economists attempting to assess the macro-economic impact of global warming, the extreme risks for mankind just mentioned suddenly appear very limited. It is this approach that we will be criticizing at length in this article.

TS.C.10.2 (…) In the case of high warming (>4°C) and limited adaptation, the magnitude of the decline in annual global GDP in 2100 relative to a no-warming scenario exceeds the economic losses of the Great Recession of 2008-2009 and the COVID-19 pandemic of 2020; much smaller effects are estimated for lower warming, lower vulnerability and higher adaptation (medium confidence).

Technical summary of WG 2 of the IPCC Sixth Assessment Report

First of all, comparison with the last two crises gives the impression that a warming of +4°C would be manageable from an economic point of view, just as these crises were.

In addition to this limited impact, the wording used is confusing. We’ll see in section 3.C that, in reality, studies on the global economic consequences of global warming most often postulate a simple slowdown in GDP growth over the course of the 21st century, and not a recession as was the case in 2009 and 2020. ⁵.

The IPCC transcribes here the synthesis of academic work on GDP and climate. Who are the economists who reach such conclusions? What methods do they use?

What tools do scientists use to study climate change, the consequences of global warming and ways of dealing with it?

While there is no longer any doubt about the reality of climate change, its causes and its potentially dramatic consequences, the future remains fundamentally uncertain, if only because it depends on future human behavior.

As a result, we don’t know what path humanity will take over the next few decades to change or reverse current trends.

The simplified diagram below illustrates the complex interactions between climate, human societies and natural systems. Once again, the scientific disciplines involved are extremely varied. They range from the life and earth sciences (climatologists, ecologists, oceanologists, etc.) to the engineering sciences (energy systems, agronomists, etc.) and the social sciences (demographers, economists, sociologists, etc.).

To study possible futures, scientists make extensive use of the scenario tool.

The I4CE think tank has identified three main families of climate-related scenarios.

–Climate scenarios, used by climatologists, study the evolution of the climate system as a function of different GHG emission trajectories (phase 3 of the above loop and IPCC WG1).

–Socio-economic scenarios, used by climate economists, explore the consequences of the evolution of human societies on greenhouse gas emission trajectories (and therefore ultimately on global warming). When it comes to exploring how to limit emissions to reach a climate target (2°C or 1.5°C), we speak of “transition scenarios”. These are then compared with “business as usual” or “reference” scenarios, which consist in letting trends continue without introducing any constraints linked to a climate target (these scenarios are in phases 1 and 2 of the above loop and are mainly studied by the IPCC’s WG3).

–Impact scenarios, used by the scientists mentioned in Part 1, study the consequences of global warming on human societies and natural systems (phases 4 and 5 of the above loop and IPCC WG2).

A scenario generally consists of four dimensions

–A qualitative narrative (a story) describing a possible evolution of the world.

E.g.: current social, economic and technical trends are continuing; inequalities are increasing enormously; humanity is resolutely committed to the ecological transition, etc.

–Quantitative hypotheses: this involves specifying the variables that translate the narrative in quantitative terms.

E.g.: the assumptions of a transition scenario may concern the evolution (global, regional, by country) of population, GDP, urbanization, as well as assumptions on the means (technological, political, economic, etc.) implemented to reach the identified climate objectives. The assumptions of a climate scenario will include greenhouse gas emission trajectories.

One (or more) models: a model is a set of mathematical equations designed to simulate the functioning of a real-world system as described by a certain number of variables (the global climate, a financial market, a natural ecosystem, a country’s economy) and its evolution over time.

The quantitative assumptions mentioned above constitute the model’s input data: they are said to be exogenous because they are not calculated by the model itself, but come from external sources.

Models are always simplified representations of reality. However, they are not all based on the same type of scientific knowledge. Climate models, for example, are based on the laws of physics, while economic models are based on economic theories, themselves influenced by economic currents of thought. ⁶.

–Results: these are all the quantitative output data from the model that are interpreted to complete the scenario story.

For example, in a climate scenario, we’re talking about changes in temperature, rainfall and snow cover; in a transition scenario, we’re talking about changes in demand and the energy mix, the amount of investment required and the technologies to be deployed.

Integrated assessment models (IAMs) aim to explore the entire climate-development loop.

As we saw in the previous section, each of the three main scenario families explores in detail a part of the climate-development feedback loop. For this, very different models are used.

For example, climate scenarios (located at point 3 of the loop) are based on climate models. Based on the laws of physics, they aim to make dynamic projections of how the climate may evolve over the 21st century according to different greenhouse gas emission scenarios.

Transition scenarios aim to explore a large part (or even, for some, the whole) of the loop (albeit much more superficially than scenarios and models studying a specific part of the loop).

To do this, they use Integrated Assessment Models (IAMs ), which aim to help understand the interactions between human societies, economic development and climate over the long term. Assessment is termed “integrated” because these models use information from a wide range of scientific disciplines, and aim to describe both human and natural systems, by coupling modules representing at least the economy, the energy system, the climate, etc.

While the AMI family includes models that vary widely in terms of complexity, resolution mode (simulation or optimization logic) or modeling paradigm (Bottum up or Top down model), we can distinguish two main categories.

Cost-benefit MRIs

Highly aggregated (with little or no geographical or sectoral breakdown), their aim is to determine the “optimal” GHG emissions trajectory (and therefore global warming trajectory) in the economic sense of the term, i.e. the one that enables the current costs of combating global warming to be offset by future benefits (i.e. damage avoided).

These models therefore need to assess the future damage of global warming (in terms of lost GDP). In this respect, they really do explore the whole loop (even if only superficially).

In particular, they are used to determine the “social cost of carbon”, i.e. the cost, in today’s euros, of the future damage caused by the current emission of one tonne of carbon. This work is therefore largely intended to feed into public policies on carbon pricing (via a tax or quota market).

Examples: models called DICE, PAGE, FUND are cost-benefit IAMs.

Detailed process-based IAM

Much more complex and disaggregated, they go further than their predecessors in analyzing the coupling of human and natural systems, by making modules interact that represent the economy (with more or less sectors), the energy system, the climate, but also sometimes agriculture and land use, or water. It is these models in particular that are used in the transition scenarios assessed by IPCC Group 3. Their aim is to answer questions such as: how can we limit global warming to +2°C, +1.5°C? What would be the impact of this or that measure?

In theory, these models should, like their predecessors, include an assessment of the damage caused by global warming to the world economy, since this necessarily has an influence on the terms of the transition. ⁷. In practice, this was hardly the case until central banks began to take an interest in climate-related financial risks (see section 4).

The Integrated Assessment Modeling Consortium ⁸ has created a wiki containing documentation for most of the IAMs used in the IPCC’s work.

How do economists study the macroeconomic damage caused by climate change?

The founding role of William Nordhaus’ work: the DICE model ⁹

In 2018, economist William Nordhaus was awarded the Nobel Prize in Economics for his pioneering work on “integrating climate change into long-term macroeconomic analysis”. In the early 1990s, he designed the first integrated assessment model, the DICE model, coupling a long-term growth module with a climate module.

DICE belongs to the category of cost-benefit AMIs (see section on AMIs).

Nordhaus’ DICE model is based on a highly aggregated and simplified representation of the global economy.

Production is based on the use of labor and capital. Technical progress increases the total productivity of these factors (TFP), leading to growth in production. ¹⁰.

Note here that GDP grows by construction and whatever happens: in fact, total factor productivity, which is decisive in calculating GDP, is an exogenous variable, i.e. it is not calculated by the model. In DICE-2016, it grows by around 2% per year throughout the 21st century.

Nordhaus combines this highly simplified representation of the economy with an equally simple climate module

Production leads to greenhouse gas emissions, which cause climate change in the form of a rise in the planet’s average temperature. This in turn causes damage (in the form of reduced production, and hence GDP). It is possible to reduce emissions in order to limit the damage, which translates into costs (also expressed in GDP points) representing the transition from a fossil fuel energy system to a decarbonized system.

Thus, in this representation of economic-climate links, actions designed to reduce emissions take the form of a reduction in consumption today (we must deprive ourselves in order to invest) and an increase in consumption in the future (by limiting climate damage).

The question Nordhaus seeks to answer is: how can we optimize intertemporal consumption?

The DICE model is therefore designed to determine the economically “optimal” greenhouse gas emissions (and therefore warming) trajectory with a view to maximizing intergenerational “well-being”. ¹¹. If the world follows this trajectory, the current costs of combating global warming will be offset by future benefits (i.e. avoided damage). The model can also be used to study “non-optimal” trajectories: for example, the continuation of current trends (the business-as-usual scenario) or the maximization of social well-being under the additional constraint that the temperature rise does not exceed 2°C.

Defining the damage function, or how to make global warming harmless to economic growth

Nordhaus’ pioneering role greatly influenced subsequent work. The fact that his model was made freely available on the Internet multiplied its appropriation and use by other researchers, and inspired subsequent generations of AMI models. In particular, he had a decisive (and unfortunate) influence on the assessment of the aggregate economic damage of global warming.

What is a damage function?

As mentioned above, one of the aims of the DICE model is to see to what extent the expenditure incurred to combat climate disruption is offset by the economic damage avoided in the future. To function, DICE therefore requires an assessment (in terms of GDP losses) of these future damages.

To achieve this, Nordhaus developed what he called a “damage function”, which links a certain level of global temperature rise to a loss of production (and therefore GDP).

Including all factors, the model’s damage function assumes that damage represents 2.1% of global income in the event of 3°C warming, and 8.5% of income in the event of 6°C warming.

Nordhaus (2017)

A change of climatic era ¹³ has a negligible effect on the economy!

Two main approaches are used to develop damage functions

In an article from 2020, economist Steve Keen takes a detailed look at the methods that Nordhaus and his successors invented in an attempt to quantify the damage to GDP caused by global warming.

–The enumerative approach consists of using natural science articles on the physical impacts of global warming (e.g. reduced agricultural yields) to translate them into production losses for certain sectors, and then aggregating the whole.

However, the number of sectors considered was very limited: most were directly exposed to meteorological conditions, such as agriculture, energy and forestry. In Nordhaus’ early work ¹⁴these sectors accounted for barely 13% of US GDP in 1991. However, the sectors considered have changed little since then ¹⁵.

The more recent statistical or econometric approach uses two types of data: cross-sectional data (geographical) and panel data (temporal).

In the first case, economists establish a correlation between the differences in GDP and climate observed today between several regions. On this basis, they deduce the effects on GDP that a rise in temperature would have on the same region. In the second case, a correlation is established between the evolution of GDP in a given region and the warming that has already taken place.

This assumes that the effect on GDP of a short-term variation in climatic conditions is a good approximation of the long-term effect of climate change. These approaches are highly open to criticism in many respects. Suffice it to say that correlation is not causation, and that extrapolating from differences (geographical or temporal) in the impact of the current climate what the economic impact of a totally unknown climate will be makes no sense.

What these methods have in common is that they are based on phenomena that are already known or anticipated, whereas global warming plunges us into unknown territory.

Global warming will reveal dependencies between nature and the economy that were previously unknown or ignored by economists. ¹⁶.

It will also have many “non-economic” impacts: health, social and even political (diseases, migrations, destabilization of societies) that are not taken into account at all by these damage functions.

One of the main problems is that climate change is taking us into uncharted territory: we don’t know how an increase in greenhouse gas concentrations will affect the climate and how climate change will affect the economy, simply because our economy has never, in the lifetime of homo sapiens, experienced anything like what we are likely to encounter. We can extrapolate the future based on the past, but whether, in these circumstances, this makes sense is highly problematic.

Nicholas Stern, Joseph E. Stiglitz, Charlotte Taylor ¹⁷

Global warming presents us with an unprecedented, unknown and highly risky situation. So it’s hardly “scientific” to extrapolate from current situations.

Threshold crossing (often referred to in physics as “threshold effects”)” is the best illustration of this.

It has now been established that global warming will not be linear, and that there are tipping points (“tipping elements”, see map) which, once crossed, will trigger chain reactions leading to runaway global warming. ¹⁸.

These tipping points are one of the reasons for adopting the target of limiting global temperature rise to +2°C above pre-industrial levels.

However, the damage functions of Nordhaus and his successors generally do not include any tipping points or discontinuities in warming.

Worse still, the studies that attempt to assess them once again conclude that their impact is negligible! This is one of the findings of an article published in 2021 in the highly prestigious scientific journal Proceedings of the National Academy of Sciences (PNAS), summarizing various articles on the economic damage associated with threshold crossings.

Tipping points reduce global per capita consumption by around 1% in the event of 3°C warming, and by around 1.4% in the event of 6°C warming.

Dietz et al (2021)

This work was strongly criticized in a short letter published in response in the journal PNAS and co-authored by economists and climatologists: “Estimates of economic and environmental damage associated with tipping points are not consistent with the scientific literature”. They conclude that future work on the macroeconomic damage of climate should be carried out in collaboration with climate scientists.

Despite these criticisms, some economists can now use the results of Dietz et. al to claim that they have incorporated tipping points into their damage function. This is what W. Nordhaus has done in the article in which he presents the 2023 version of the DICE model ¹.

Thirty years after Nordhaus’ first work, the damage functions developed by his successors still produce the same kind of results.

The following two graphs show a sample of estimates of the impact of climate change on the economy found in recent academic literature.

• The first is taken from the fifth IPCC report (2014). As can be seen, in the vast majority of cases, GDP losses for global warming of +2°C to +3°C are less than 3%.
• The second comes from a report by the NGFS, the network of central banks concerned with climate risk to financial stability (see section 4.B on the work of the NGFS).

The assessments put forward are higher, reflecting a recent upward trend in damage estimates. However, they are still limited: remember that at over 3°C, a large part of the planet will become uninhabitable. Can we seriously expect this to translate into just a 10 to 25% loss of GDP?

All the more so since, as we’ll see in the next point, these losses are measured in relation to the level of GDP that would have been achieved assuming continuous economic growth throughout the ^21st century in the absence of global warming. When damage functions indicate a GDP loss of 25%, this does not necessarily mean a recession.

The damage is all the more negligible in that it is calculated in relation to what the level of GDP would have been in the absence of global warming.

As noted in section 3.A, the DICE model assumes economic growth of around 2% per year throughout the 21st century.

Damages are applied to this rising GDP level. The following image shows what this means in concrete terms.

The DICE model is no exception: all AMIs assume continuous growth in world GDP over the course of the 20th century.

As explained in section 2.A, transition scenarios are based on a narrative, a story describing a possible evolution of the world.

The most widely used narratives today are the “Shared Socioeconomic Pathways” (SSP – see box), which were built by the scientific community precisely to provide a common framework for analyzing the impacts of climate change and ways of coping with them.

These narratives are complemented by quantitative socio-economic hypotheses. To each family of SSPs has been added :

• a demographic evolution trajectory ;
• an urban development trajectory ;
• three GDP trajectories (developed by research institutes IIASA and PIK, and by theOECD).

The vast majority of IAMs (regardless of category) use SSP and associated trajectories. ¹⁹GDP growth over the course of the century is therefore a basic assumption in models designed to assess the impact of climate change.

Applying existing damage functions to these IAM models will therefore always give the impression of slower growth, not recession or chaotic developments.

Few works, however, venture to publish graphs highlighting this, as the result seems so aberrant. The only one encountered during the writing of this fact sheet is the one published in 2021 by the ECB (see section 4.C).

What influence do these economic studies have on climate damage, and why are they dangerous?

Economic studies that conclude that global warming has a marginal impact on GDP growth have long dominated economic discourse on climate. While the limitations of this work are now widely criticized and recognized, it nevertheless continues to be used by central banks and financial supervisors to fuel research into climate risks.

However, these studies are dangerous: taken out of context (and therefore without descriptions of their limitations), they contribute to the arguments relativising the consequences of global warming put forward by personalities who approach the climate issue through this single entry point.

For over 25 years, the message that global warming has no significant impact on GDP has dominated economic discourse.

First of all, it should be remembered that climate and natural resources are not the focus of research in the discipline of economics (a point developed in the module on natural resources and pollution). In practical terms, even today, the macroeconomic models most widely used by public institutions to inform economic policy ignore the exploitation and destruction of nature (see module on GDP, growth and planetary limits).

Nordhaus had a major impact on the work that followed, given the paucity of work on the climate issue. This is explained, for example, by economist Steve Keen, who highlights the failure of the peer review process in the absence of a diversity of researchers.

As any academic knows, once you are published in a field, you will be selected by journal editors as a reviewer for that field. So, instead of providing an independent check on the accuracy of research, peer review can be used to impose a hegemony. As one of the first of the very few neoclassical economists to work on climate change, and the first to provide empirical estimates of the damage caused to the economy by climate change, Nordhaus was able to frame the debate and play a gatekeeper role.

Steve Keen (2020)

Yet, for almost 25 years, Nordhaus and his successors have highlighted results concluding that climate change has a negligible impact on the economy. In his recommendations, Nordhaus has long advocated very gradual climate policies, starting with low emission reductions and building up over the course of the 21st century.

We had to wait until 2006 and the publication of economist Nicholas Stern’s report ²⁰ to get the message across to the press and decision-makers that global warming would have significant economic consequences.

This work has therefore fuelled the discourse of climate sceptics. They have been a force for inaction, providing “scientific” arguments for political leaders and economic players who are quite content with the message that limited measures to combat global warming (policies of “small steps”, which make little difference to the functioning of the economic system) are “optimal”.

When Nordhaus was awarded the Nobel Prize, a great deal of criticism was voiced in the media about the methodologies he had helped to develop, and in particular about damage functions. The weaknesses and problems of this work are now widely recognized, and most publications referring to it are careful to point out its limitations. Paradoxically, this trend is accompanied by an increase in the use of this work by public players, driven by research into climate-related financial risks.

The growing use of damage functions driven by central banks

Awareness of systemic climate-related financial risks and creation of NGFS

In September 2015, in his “Tragedy of the Horizons” speech Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, states that global warming presents risks with potentially systemic financial consequences. He lists the different types of climate risk to the economy ²¹ :

• Physical risks: the impact of climate-related disasters on businesses, production chains and trade.
• Transition risks: the impact on carbon-intensive businesses of economic changes linked to the ecological transition aimed at reducing greenhouse gas emissions.
• Liability risks: legal action initiated by victims or other stakeholders.

These risks weighing on companies can spill over to financial institutions and thus threaten the stability of the financial system. This realization led to the creation in December 2017 of the NGFS (Network for Greening the Financial System), a network bringing together more than a hundred central banks and supervisors in 2022 to “help strengthen the global response required to meet the goals of the Paris Agreement and enhance the role of the financial system in managing risk and mobilizing capital for green and low-carbon investments” (see the NGFS website).

NGFS develops transition scenarios

The NGFS has worked on different transition scenarios to provide its members with a common reference point for assessing the physical and transition risks in their respective areas.

Scenarios range from an orderly transition (“net zero” 2050) limiting both transition and physical risks, to a simple continuation of current trends (“current policies”) where transition risks do not exist but physical risks are significant. In the former case, warming is limited to 1.5°C; in the latter, it rises to more than 3°C (and may rise as high as 5°C, the shaded part of the diagram below reflecting uncertainties about the climate system’s response to a certain level of warming).

Physical risks are calculated on the basis of damage functions

To study its scenarios, the NGFS uses much more sophisticated models than DICE-type cost-benefit IAMs.

These are the detailed process-based IAMs presented in section 2. In order to estimate the physical risks of global warming, the NGFS has incorporated damage functions into these IAMs, based on academic literature. Thus, in the first version of its scenarios published in 2020, three damage functions were tested (one of which extended to 25% GDP losses; see graph below). In the end, it was Kalkuhl and Wenz (2020) who were chosen. ²² was chosen for the 2021 version of the scenarios.

The results are presented below: the climate damage of a scenario leading to over 3°C does not even reach 15% of global GDP.

Remember that this represents 15% less GDP than would have been the case in the absence of climate change.

The work of the NGFS serves as a framework for central banks to estimate climate risks.

The ECB used this framework to carry out climate stress tests for European banks.

Here are the results concerning the impact of physical risks on GDP. The difference between a transition scenario enabling global warming to be limited to 1.5°C and the absence of ecological transition policies is a GDP that grows just a little slower.

The Council of Economic Advisers and the Office of Management and Budget, both part of the Executive Office of the President of the United States, published a White Paper on climate-related macroeconomic risks in 2022.

We find the following assessments for the “current policies” scenarios, i.e. those in which governments do not implement any climate policies in addition to those already in place. Once again, the impact on growth is very low.

In early 2022, the Bank of England published the Climate Biennial Exploratory Scenario report, in which it explores the transition and physical risks to the country’s financial system in three scenarios. Two scenarios explore two paths to British carbon neutrality by 2050, depending on whether action is taken “Early Action” or “Late Action”. A third scenario, “No Additional Action”, explores the physical risks that would begin to materialize if governments around the world failed to take action to combat global warming.

Not only is this work scientifically questionable, it’s also dangerous!

There are three main reasons for this

1. Even if awareness of the reality of global warming is now fairly widespread, climate sceptics remain numerous.

In a context where information now circulates quite widely via images relayed on social networks, graphs such as the ECB’s presented above, taken out of the context of their report, can easily fuel a climatoskeptic discourse. The explanations we give in this fact sheet on how the impact of climate change on growth is assessed can help you counter climate-skeptic “arguments”.

2. There’s a difference between accepting the reality of climate change and really understanding what it means.

In economic and financial circles, professionals who approach the climate issue mainly through the type of reports presented above may therefore have the image that global warming in excess of 3°C would certainly be detrimental, but manageable nonetheless.
This is how, for example, the director of the Banque Publique d’Investissement France can believe he’ s speaking out against global warming while asserting that “1.5°C is cooked, but we must try to keep temperatures below 2.5°C, let’s say 3°C”.
It was also on the basis of this type of work that Stuart Kirk, HSBC’s Head of Responsible Investment, was able to give a speech at a conference organized by the Financial Times in May 2022, explaining why investors didn’t have to worry about climate risks.

3. Without explicitly saying so, these studies suggest that economic growth (assumed to be essentially independent of climate change, since it is based on continuous technical progress) will enable humanity to provide itself with the means to adapt to a climate change that is, after all, “manageable”.

On the contrary, the message from climatologists is to do everything possible to avoid the unmanageable and limit the already serious consequences of a 1.5°C-2°C scenario.

This work is not only scientifically questionable, because it is based on a framework that we know to be deeply flawed, but also and above all dangerous, because it suggests that this framework is plausible, and thus feeds the rhetoric that slows or even discourages action against climate change.

The fact that this work is still published in leading scientific journals and increasingly used by central banks is all the more questionable given that other approaches to climate damage have been developed.

Thus, for Martin Weitzman, one of Nordhaus’s main critics also shortlisted for the 2018 “Nobel Prize”, the existence of climate tipping points makes any attempt to assess future damage futile. The significant probability of warming scenarios with dramatic consequences for humanity, in itself, justifies radical action to reduce greenhouse gas emissions. In his view, such policies could be seen as “insurance policies” against catastrophic climate scenarios.