Degrees and Dollars

Kevin Lewis

April 21, 2021

The GDP-Temperature relationship: Implications for climate change damages
Richard Newell, Brian Prest & Steven Sexton
Journal of Environmental Economics and Management, forthcoming


Econometric models of temperature impacts on GDP are increasingly used to inform global warming damage assessments. But theory does not prescribe estimable forms of this relationship. By estimating 800 plausible specifications of the temperature-GDP relationship, we demonstrate that a wide variety of models are statistically indistinguishable in their out-of-sample performance, including models that exclude any temperature effect. This full set of models, however, implies a wide range of climate change impacts by 2100, yielding considerable model uncertainty. The uncertainty is greatest for models that specify effects of temperature on GDP growth that accumulate over time; the 95% confidence interval that accounts for both sampling and model uncertainty across the best-performing models ranges from 84% GDP losses to 359% gains. Models of GDP levels effects yield a much narrower distribution of GDP impacts centered around 1–3% losses, consistent with damage functions of major integrated assessment models. Further, models that incorporate lagged temperature effects are indicative of impacts on GDP levels rather than GDP growth. We identify statistically significant marginal effects of temperature on poor country GDP and agricultural production, but not rich country GDP, non-agricultural production, or GDP growth.

The producer benefits of implicit fossil fuel subsidies in the United States
Matthew Kotchen
Proceedings of the National Academy of Sciences, 6 April 2021


This paper estimates the financial benefits accruing to fossil fuel producers (i.e., the producer incidence) that arise because of implicit fossil fuel subsidies in the United States. The analysis takes account of coal, natural gas, gasoline, and diesel, along with the implicit subsidies due to externalized environmental damages, public health effects, and transportation-related costs. The direct benefit to fossil fuel producers across all four fuels is estimated at $62 billion per year, a sum calculated due to the higher price that suppliers receive because of inefficient pricing compared to the counterfactual scenario where environmental and public health externalities are internalized. A significant portion of these benefits accrue to relatively few companies, and specific estimates are provided for companies with the largest production. The financial benefit because of unpriced costs borne by society is comparable to 18% of net income from continuing domestic operations for the median natural gas and oil producer in 2017–2018, and it exceeds net income for the majority of coal producers. The results clarify what the domestic fossil fuel industry has at stake financially when it comes to policies that seek to address climate change, adverse health effects from local pollution, and inefficient transportation.

Robust Decarbonization of the US Power Sector: Policy Options
James Stock & Daniel Stuart
NBER Working Paper, April 2021


To reliably achieve deep decarbonization of the US power sector, a candidate policy must perform robustly across a range of possible future trajectories of demand, fossil fuel prices, and prices of new wind and solar capacity. Using a modified version of the NREL ReEDS model with scenarios that span different trajectories of demand, fuel prices, and technology costs, we find that some recently proposed policies can robustly achieve 80% decarbonization (relative to 2005 emissions) or more by 2035, but many do not. The two robustly successful policies are a tradeable performance standard (TPS) and a hybrid Clean Electricity Standard (CES) with a 100% clean target, partial crediting of gas generation, and a $40/mton CO2 alternative compliance payment (ACP) backstop. Both are nearly as cost effective as the emissions-equivalent efficient policy. A $40 carbon tax nearly achieves the robust 80% threshold and, in most scenarios, drives deep decarbonization. A 90% CES (without partial crediting) fails to achieve robust 2035 decarbonization because it need not drive coal out of the system. Simply extending renewable energy tax credits, which are set to expire, does not drive significant decarbonization in most scenarios, nor does relying on increased ambition in green-leaning states.

Evaluating the Economic Cost of Coastal Flooding
Klaus Desmet et al.
American Economic Journal: Macroeconomics, April 2021, Pages 444-486


Sea level rise will cause spatial shifts in economic activity over the next 200 years. Using a spatially disaggregated, dynamic model of the world economy, this paper estimates the consequences of probabilistic projections of local sea level changes. Under an intermediate scenario of greenhouse gas emissions, permanent flooding is projected to reduce global real GDP by 0.19 percent in present value terms. By the year 2200, a projected 1.46 percent of the population will be displaced. Losses in coastal localities are much larger. When ignoring the dynamic response of investment and migration, the loss in real GDP in 2200 increases from 0.11 percent to 4.5 percent.

Economic footprint of California wildfires in 2018
Daoping Wang et al.
Nature Sustainability, March 2021, Pages 252–260


Recent increases in the frequency and scale of wildfires worldwide have raised concerns about the influence of climate change and associated socioeconomic costs. In the western United States, the hazard of wildfire has been increasing for decades. Here, we use a combination of physical, epidemiological and economic models to estimate the economic impacts of California wildfires in 2018, including the value of destroyed and damaged capital, the health costs related to air pollution exposure and indirect losses due to broader economic disruption cascading along with regional and national supply chains. Our estimation shows that wildfire damages in 2018 totalled $148.5 (126.1–192.9) billion (roughly 1.5% of California’s annual gross domestic product), with $27.7 billion (19%) in capital losses, $32.2 billion (22%) in health costs and $88.6 billion (59%) in indirect losses (all values in US$). Our results reveal that the majority of economic impacts related to California wildfires may be indirect and often affect industry sectors and locations distant from the fires (for example, 52% of the indirect losses—31% of total losses—in 2018 were outside of California). Our findings and methods provide new information for decision makers tasked with protecting lives and key production sectors and reducing the economic damages of future wildfires.

Day-to-day temperature variability reduces economic growth
Maximilian Kotz et al.
Nature Climate Change, April 2021, Pages 319–325


Elevated annual average temperature has been found to impact macro-economic growth. However, various fundamental elements of the economy are affected by deviations of daily temperature from seasonal expectations which are not well reflected in annual averages. Here we show that increases in seasonally adjusted day-to-day temperature variability reduce macro-economic growth independent of and in addition to changes in annual average temperature. Combining observed day-to-day temperature variability with subnational economic data for 1,537 regions worldwide over 40 years in fixed-effects panel models, we find that an extra degree of variability results in a five percentage-point reduction in regional growth rates on average. The impact of day-to-day variability is modulated by seasonal temperature difference and income, resulting in highest vulnerability in low-latitude, low-income regions (12 percentage-point reduction). These findings illuminate a new, global-impact channel in the climate–economy relationship that demands a more comprehensive assessment in both climate and integrated assessment models.

The social cost of carbon and inequality: When local redistribution shapes global carbon prices
Ulrike Kornek et al.
Journal of Environmental Economics and Management, forthcoming


The social cost of carbon is a central metric for optimal carbon prices. Previous literature shows that inequality significantly influences the social cost of carbon, but mostly omits heterogeneity below the national level. We present an optimal taxation model of the social cost of carbon that accounts for inequality between and within countries. We find that climate and distributional policy can generally not be separated. If only one country does not compensate low-income households for disproportionate damages, the social cost of carbon tends to increase globally. Optimal carbon prices remain roughly unchanged if national redistribution leaves inequality between households unaffected by climate change and if the utility of households is approximately logarithmic in consumption.

Anthropogenic climate change has slowed global agricultural productivity growth
Ariel Ortiz-Bobea et al.
Nature Climate Change, April 2021, Pages 306–312


Agricultural research has fostered productivity growth, but the historical influence of anthropogenic climate change (ACC) on that growth has not been quantified. We develop a robust econometric model of weather effects on global agricultural total factor productivity (TFP) and combine this model with counterfactual climate scenarios to evaluate impacts of past climate trends on TFP. Our baseline model indicates that ACC has reduced global agricultural TFP by about 21% since 1961, a slowdown that is equivalent to losing the last 7 years of productivity growth. The effect is substantially more severe (a reduction of ~26–34%) in warmer regions such as Africa and Latin America and the Caribbean. We also find that global agriculture has grown more vulnerable to ongoing climate change.

Common Era sea-level budgets along the U.S. Atlantic coast
Jennifer Walker et al.
Nature Communications, March 2021


Sea-level budgets account for the contributions of processes driving sea-level change, but are predominantly focused on global-mean sea level and limited to the 20th and 21st centuries. Here we estimate site-specific sea-level budgets along the U.S. Atlantic coast during the Common Era (0–2000 CE) by separating relative sea-level (RSL) records into process-related signals on different spatial scales. Regional-scale, temporally linear processes driven by glacial isostatic adjustment dominate RSL change and exhibit a spatial gradient, with fastest rates of rise in southern New Jersey (1.6 ± 0.02 mm yr−1). Regional and local, temporally non-linear processes, such as ocean/atmosphere dynamics and groundwater withdrawal, contributed between −0.3 and 0.4 mm yr−1 over centennial timescales. The most significant change in the budgets is the increasing influence of the common global signal due to ice melt and thermal expansion since 1800 CE, which became a dominant contributor to RSL with a 20th century rate of 1.3 ± 0.1 mm yr−1.

Impacts of hypoxic events surpass those of future ocean warming and acidification
Eduardo Sampaio et al.
Nature Ecology & Evolution, March 2021, Pages 311–321


Over the past decades, three major challenges to marine life have emerged as a consequence of anthropogenic emissions: ocean warming, acidification and oxygen loss. While most experimental research has targeted the first two stressors, the last remains comparatively neglected. Here, we implemented sequential hierarchical mixed-model meta-analyses (721 control–treatment comparisons) to compare the impacts of oxygen conditions associated with the current and continuously intensifying hypoxic events (1–3.5 O2 mg l−1) with those experimentally yielded by ocean warming (+4 °C) and acidification (−0.4 units) conditions on the basis of IPCC projections (RCP 8.5) for 2100. In contrast to warming and acidification, hypoxic events elicited consistent negative effects relative to control biological performance—survival (–33%), abundance (–65%), development (–51%), metabolism (–33%), growth (–24%) and reproduction (–39%)—across the taxonomic groups (mollusks, crustaceans and fish), ontogenetic stages and climate regions studied. Our findings call for a refocus of global change experimental studies, integrating oxygen concentration drivers as a key factor of ocean change. Given potential combined effects, multistressor designs including gradual and extreme changes are further warranted to fully disclose the future impacts of ocean oxygen loss, warming and acidification.

Aquatic biodiversity enhances multiple nutritional benefits to humans
Joey Bernhardt & Mary O’Connor
Proceedings of the National Academy of Sciences, 13 April 2021


Humanity depends on biodiversity for health, well-being, and a stable environment. As biodiversity change accelerates, we are still discovering the full range of consequences for human health and well-being. Here, we test the hypothesis — derived from biodiversity-ecosystem functioning theory — that species richness and ecological functional diversity allow seafood diets to fulfill multiple nutritional requirements, a condition necessary for human health. We analyzed a newly synthesized dataset of 7,245 observations of nutrient and contaminant concentrations in 801 aquatic animal taxa and found that species with different ecological traits have distinct and complementary micronutrient profiles but little difference in protein content. The same complementarity mechanisms that generate positive biodiversity effects on ecosystem functioning in terrestrial ecosystems also operate in seafood assemblages, allowing more diverse diets to yield increased nutritional benefits independent of total biomass consumed. Notably, nutritional metrics that capture multiple micronutrients and fatty acids essential for human well-being depend more strongly on biodiversity than common ecological measures of function such as productivity, typically reported for grasslands and forests. Furthermore, we found that increasing species richness did not increase the amount of protein in seafood diets and also increased concentrations of toxic metal contaminants in the diet. Seafood-derived micronutrients and fatty acids are important for human health and are a pillar of global food and nutrition security. By drawing upon biodiversity–ecosystem functioning theory, we demonstrate that ecological concepts of biodiversity can deepen our understanding of nature’s benefits to people and unite sustainability goals for biodiversity and human well-being.


from the


A weekly newsletter with free essays from past issues of National Affairs and The Public Interest that shed light on the week's pressing issues.


to your National Affairs subscriber account.

Already a subscriber? Activate your account.


Unlimited access to intelligent essays on the nation’s affairs.

Subscribe to National Affairs.