Sixteenth CEPR-EAERE Webinar Series on Climate Policy: The Macroeconomic Impact of Climate Change: Global vs. Local Temperature

For the 16th Episode of the CEPR/EAERE Webinar Series, on Wednesday, 17 July 2024, from 5 PM (CEST), 11 AM (ET), and 4 PM (BST), Adrien Bilal (Harvard University and CEPR) and Diego R. Känzig (Northwestern University and CEPR) presented their paper The Macroeconomic Impact of Climate Change: Global vs. Local Temperature. This paper estimates that the macroeconomic damages from climate change are six times larger than previously thought. The authors exploit natural variability in global temperature and rely on time-series variation. A 1°C increase in global temperature leads to a 12% decline in world GDP. Global temperature shocks correlate much more strongly with extreme climatic events than the country-level temperature shocks commonly used in the panel literature, explaining why the estimate is substantially larger. The authors use a reduced-form evidence to estimate structural damage functions in a standard neoclassical growth model. The results imply a Social Cost of Carbon of $1,056 per ton of carbon dioxide. A business-as-usual warming scenario leads to a present value welfare loss of 31%. Both are multiple orders of magnitude above previous estimates and imply that unilateral decarbonization policy is cost-effective for large countries such as the United States.

The Macroeconomic Impact of Climate Change: Global vs. Local Temperature

with co-authors Adrien Bilal (Harvard University and CEPR) and Diego R. Känzig (Northwestern University and CEPR). 

Discussant  Simon Dietz (London School of Economics and CEPR) 

The presentation was by a discussion and Q&A session with the audience moderated by Christian Gollier (Toulouse School of Economics, EAERE, and CEPR).