Tough days ahead
Can You Feel the Heat? Extreme Temperatures, Stock Returns, and Economic Sentiment
Christos Makridis
Stanford Working Paper, January 2018
Abstract:
This paper examines how shocks to daily temperature affect security prices by influencing the way individuals acquire and process information. First, I show that increases in both the mean and standard deviation of extreme temperatures (below 15 and above 85 degrees Fahrenheit) are associated with a 0.02% and 0.5% decline in value-weighted stock returns, respectively, conditional on firm fundamentals and both county and time fixed effects. Second, to understand the mechanism behind these declines, I draw on newly licensed individual-level data from Gallup between 2008 and 2016. I show that an additional degree increase in extreme temperatures is associated with a 0.01-0.02 standard deviation decline in perceptions about the current and future state of the economy. These declines in economic sentiment are concentrated among college educated individuals and workers in cognitively intensive jobs. Roughly half of the variation in temperature-induced economic sentiment declines is explained by similar declines in perceptions of current life satisfaction in response to extreme temperatures. These results have implications for models with climate risk since increasing climate variability may raise the amount of non-fundamental risk in the market.
Collective Action in an Asymmetric World
Cuicui Chen & Richard Zeckhauser
Journal of Public Economics, forthcoming
Abstract:
A central authority possessing tax and expenditure responsibilities can readily provide an efficient level of a public good. Absent a central authority, voluntary arrangements must replace coercive ones, and significant under-provision must be expected. International public goods are particularly challenging due to the substantial asymmetries among nations. Small-interest nations have strong incentives to ride cheaply. Our empirical results reveal cheap riding intentions in providing for climate change mitigation, a critical international public good. The evidence is provided by individual nations Intended Nationally Determined Contributions voluntarily pledged for the Paris Climate Change Conference. We find that larger nations made much larger pledges in proportion to both their Gross National Incomes and their historical emissions. Implications for the Nordhaus Climate Club and carbon-tax proposals are discussed. To achieve Pareto optimality despite disparate cheap-riding incentives, we propose the Cheap-Riding Efficient equilibrium. That solution takes the Nash equilibrium as a base point, and then applies the principles of either the Nash Bargaining solution or the Lindahl equilibrium to proceed to the Pareto frontier.
The Affordability Goal and Prices in the National Flood Insurance Program
Matthew Kahn & Kerry Smith
NBER Working Paper, December 2017
Abstract:
The United States Gulf Region features areas that face significant flood risk. Climate change may further elevate this risk. Home owners in such areas face potentially large asset losses and property maintenance costs. Anticipating these challenges, the Federal government has enacted a complex set of policies through its National Flood Insurance Program (NFIP). The NFIP offers reduced insurance rates for homes built before rate maps were drawn and grandfathers rates for homes when new maps increase their risk ratings. This paper asks if the goal of affordable NFIP insurance rates for the high risk Gulf Coast areas is warranted? We compare the income distribution of the set of people who live in the areas that face the highest risk of flooding relative to nearby areas. Our findings imply reduced rates for high risk areas cannot be justified based on the assumption that low income households live in these areas.
When Competition Plays Clean: Industrial Organization and Renewable Energy Politics
Nathan Lee
Stanford Working Paper, December 2017
Abstract:
Why do some governments adopt renewable energy policies while others do not? I argue that polities with deregulated energy markets are more likely adopt renewable energy policies because market competition undermines the political power of legacy producers. Using a generalized difference-in-differences analysis, I show that U.S. states that adopt electricity deregulation laws are subsequently 38 percentage points more likely to adopt a renewable portfolio standard and 15 points more likely to adopt a cap-and-trade program. I argue that this pattern is driven by a redistribution of industry interest-group power: deregulation leads to a 20 percentage point decline in the market share of legacy producers (utilities) and a corresponding increase in market share for independent producers. Following deregulation, independent producers become more politically active and also disproportionately invest in renewable energy. These findings have implications for both energy policy as well as the study of industrial interest-group competition more generally.
Climate vulnerability and resilience in the most valuable North American fishery
Arnault Le Bris et al.
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
Managing natural resources in an era of increasing climate impacts requires accounting for the synergistic effects of climate, ecosystem changes, and harvesting on resource productivity. Coincident with recent exceptional warming of the northwest Atlantic Ocean and removal of large predatory fish, the American lobster has become the most valuable fishery resource in North America. Using a model that links ocean temperature, predator density, and fishing to population productivity, we show that harvester-driven conservation efforts to protect large lobsters prepared the Gulf of Maine lobster fishery to capitalize on favorable ecosystem conditions, resulting in the record-breaking landings recently observed in the region. In contrast, in the warmer southern New England region, the absence of similar conservation efforts precipitated warming-induced recruitment failure that led to the collapse of the fishery. Population projections under expected warming suggest that the American lobster fishery is vulnerable to future temperature increases, but continued efforts to preserve the stock's reproductive potential can dampen the negative impacts of warming. This study demonstrates that, even though global climate change is severely impacting marine ecosystems, widely adopted, proactive conservation measures can increase the resilience of commercial fisheries to climate change.
Temperature and humidity based projections of a rapid rise in global heat stress exposure during the 21st century
Ethan Coffel, Radley Horton & Alex de Sherbinin
Environmental Research Letters, January 2018
Abstract:
As a result of global increases in both temperature and specific humidity, heat stress is projected to intensify throughout the 21st century. Some of the regions most susceptible to dangerous heat and humidity combinations are also among the most densely populated. Consequently, there is the potential for widespread exposure to wet bulb temperatures that approach and in some cases exceed postulated theoretical limits of human tolerance by mid- to late-century. We project that by 2080 the relative frequency of present-day extreme wet bulb temperature events could rise by a factor of 100–250 (approximately double the frequency change projected for temperature alone) in the tropics and parts of the mid-latitudes, areas which are projected to contain approximately half the world's population. In addition, population exposure to wet bulb temperatures that exceed recent deadly heat waves may increase by a factor of five to ten, with 150–750 million person-days of exposure to wet bulb temperatures above those seen in today's most severe heat waves by 2070–2080. Under RCP 8.5, exposure to wet bulb temperatures above 35 °C — the theoretical limit for human tolerance — could exceed a million person-days per year by 2080. Limiting emissions to follow RCP 4.5 entirely eliminates exposure to that extreme threshold. Some of the most affected regions, especially Northeast India and coastal West Africa, currently have scarce cooling infrastructure, relatively low adaptive capacity, and rapidly growing populations. In the coming decades heat stress may prove to be one of the most widely experienced and directly dangerous aspects of climate change, posing a severe threat to human health, energy infrastructure, and outdoor activities ranging from agricultural production to military training.
Global, Regional, and Megacity Trends in the Highest Temperature of the Year: Diagnostics and Evidence for Accelerating Trends
Simon Michael Papalexiou et al.
Earth's Future, forthcoming
Abstract:
Trends in short-lived high-temperature extremes record a different dimension of change than the extensively studied annual and seasonal mean daily temperatures. They also have important socioeconomic, environmental, and human health implications. Here, we present analysis of the highest temperature of the year for approximately 9000 stations globally, focusing on quantifying spatially explicit exceedance probabilities during the recent 50- and 30-year periods. A global increase of 0.19°C per decade during the past 50 years (through 2015) accelerated to 0.25°C per decade during the last 30 years, a faster increase than in the mean annual temperature. Strong positive 30-year trends are detected in large regions of Eurasia and Australia with rates higher than 0.60°C per decade. In cities with more than 5 million inhabitants, where most heat-related fatalities occur, the average change is 0.33°C per decade, while some east Asia cities, Paris, Moscow, and Houston have experienced changes higher than 0.60°C per decade.
Elevated increases in human-perceived temperature under climate warming
Jianfeng Li et al.
Nature Climate Change, January 2018, Pages 43–47
Abstract:
Changes in air temperature (AT), humidity and wind speed (Wind) affect apparent temperature (AP), the human-perceived equivalent temperature. Here we show that under climate warming, both reanalysis data sets and Global Climate Model simulations indicate that AP has increased faster than AT over land. The faster increase in AP has been especially significant over low latitudes and is expected to continue in the future. The global land average AP increased at 0.04 °C per decade faster than AT before 2005. This trend is projected to increase to 0.06 °C (0.03–0.09 °C; minimum and maximum of the ensemble members) per decade and 0.17 °C (0.12–0.25 °C) per decade under the Representative Concentration Pathway 4.5 scenario (RCP4.5) and RCP8.5, respectively, and reduce to 0.02 °C (0–0.03 °C) per decade under RCP2.6 over 2006–2100. The higher increment in AP in summer daytime is more remarkable than in winter night-time and is most prominent over low latitudes. The summertime increases in AT-based thermal discomfort are projected to balance the wintertime decreases in AT-based discomfort over low and middle latitudes, while the summertime increases in AP-based thermal discomfort are expected to outpace the wintertime decreases in AP-based thermal discomfort. Effective climate change mitigation efforts to achieve RCP2.6 can considerably alleviate the faster increase in AP.
Global mortality from storm surges is decreasing
Laurens Bouwer & Sebastiaan Jonkman
Environmental Research Letters, January 2018
Abstract:
Changes in society's vulnerability to natural hazards are important to understand, as they determine current and future risks, and the need to improve protection. Very large impacts including high numbers of fatalities occur due to single storm surge flood events. Here, we report on impacts of global coastal storm surge events since the year 1900, based on a compilation of events and data on loss of life. We find that over the past, more than eight thousand people are killed and 1.5 million people are affected annually by storm surges. The occurrence of very substantial loss of life (>10 000 persons) from single events has however decreased over time. Moreover, there is a consistent decrease in event mortality, measured by the fraction of exposed people that are killed, for all global regions, except South East Asia. Average mortality for storm surges is slightly higher than for river floods, but lower than for flash floods. We also find that for the same coastal surge water level, mortality has decreased over time. This indicates that risk reduction efforts have been successful, but need to be continued with projected climate change, increased rates of sea-level rise and urbanisation in coastal zones.
Big Jump of Record Warm Global Mean Surface Temperature in 2014-2016 Related to Unusually Large Oceanic Heat Releases
Jianjun Yin et al.
Geophysical Research Letters, forthcoming
Abstract:
A 0.24°C jump of record warm global mean surface temperature (GMST) over the past three consecutive record-breaking years (2014-2016) was highly unusual and largely a consequence of an El Niño that released unusually large amounts of ocean heat from the subsurface layer of the northwestern tropical Pacific (NWP). This heat had built up since the 1990s mainly due to greenhouse-gas (GHG) forcing and possible remote oceanic effects. Model simulations and projections suggest that the fundamental cause, and robust predictor of large record-breaking events of GMST in the 21st century is GHG forcing rather than internal climate variability alone. Such events will increase in frequency, magnitude and duration, as well as impact, in the future unless GHG forcing is reduced.
Pathways to 1.5 °C and 2 °C warming based on observational and geological constraints
Philip Goodwin et al.
Nature Geoscience, forthcoming
Abstract:
To restrict global warming to below the agreed targets requires limiting carbon emissions, the principal driver of anthropogenic warming. However, there is significant uncertainty in projecting the amount of carbon that can be emitted, in part due to the limited number of Earth system model simulations and their discrepancies with present-day observations. Here we demonstrate a novel approach to reduce the uncertainty of climate projections; using theory and geological evidence we generate a very large ensemble (3 × 104) of projections that closely match records for nine key climate metrics, which include warming and ocean heat content. Our analysis narrows the uncertainty in surface-warming projections and reduces the range in equilibrium climate sensitivity. We find that a warming target of 1.5 °C above the pre-industrial level requires the total emitted carbon from the start of year 2017 to be less than 195–205 PgC (in over 66% of the simulations), whereas a warming target of 2 °C is only likely if the emitted carbon remains less than 395–455 PgC. At the current emission rates, these warming targets are reached in 17–18 years and 35–41 years, respectively, so that there is a limited window to develop a more carbon-efficient future.
Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy
Eva Lyubich, Joseph Shapiro & Reed Walker
NBER Working Paper, January 2018
Abstract:
This paper provides the first estimates of within-industry heterogeneity in energy and CO2 productivity for the entire U.S. manufacturing sector. We measure energy and CO2 productivity as output per dollar energy input or per ton CO2 emitted. Three findings emerge. First, within narrowly defined industries, heterogeneity in energy and CO2 productivity across plants is enormous. Second, heterogeneity in energy and CO2 productivity exceeds heterogeneity in most other productivity measures, like labor or total factor productivity. Third, heterogeneity in energy and CO2 productivity has important implications for environmental policies targeting industries rather than plants, including technology standards and carbon border adjustments.
Potentially dangerous consequences for biodiversity of solar geoengineering implementation and termination
Christopher Trisos et al.
Nature Ecology & Evolution, forthcoming
Abstract:
Solar geoengineering is receiving increased policy attention as a potential tool to offset climate warming. While climate responses to geoengineering have been studied in detail, the potential biodiversity consequences are largely unknown. To avoid extinction, species must either adapt or move to track shifting climates. Here, we assess the effects of the rapid implementation, continuation and sudden termination of geoengineering on climate velocities — the speeds and directions that species would need to move to track changes in climate. Compared to a moderate climate change scenario (RCP4.5), rapid geoengineering implementation reduces temperature velocities towards zero in terrestrial biodiversity hotspots. In contrast, sudden termination increases both ocean and land temperature velocities to unprecedented speeds (global medians >10 km yr−1) that are more than double the temperature velocities for recent and future climate change in global biodiversity hotspots. Furthermore, as climate velocities more than double in speed, rapid climate fragmentation occurs in biomes such as temperate grasslands and forests where temperature and precipitation velocity vectors diverge spatially by >90°. Rapid geoengineering termination would significantly increase the threats to biodiversity from climate change.
Projected changes in future climate over the Midwest and Great Lakes region using downscaled CMIP5 ensembles
Kyuhyun Byun & Alan Hamlet
International Journal of Climatology, forthcoming
Abstract:
Despite an increasing body of evidence from observed data that climate change is having a significant impact on different types of biogeophysical systems in the Midwest and Great Lakes region, there still remain critical questions of how quickly and how much climate will be altered over this region in the future. For this evaluation, we make use of 31 global climate model (GCM) projections from the Coupled Model Intercomparison Project, Phase 5 (CMIP5). Based on changes in temperature (T) and precipitation (P) over the Midwest, we selected ten GCM scenarios which (1) simulate historical climate well and (2) successfully capture the range of future climate from the entire CMIP5 ensemble. We then downscaled T and P projections to 1/16° gridded data sets for two different emission scenarios (RCP4.5 and RCP8.5) for three 30-year future periods using the Hybrid Delta (HD) statistical downscaling approach which was proven to be applicable for daily-scale application by a validation work using historical data. T is projected to increase across all seasons, with ensemble mean changes up to 6.5 °C by 2100 for the RCP8.5 scenarios. P increases up to 30% in spring and winter with decreasing snowfall to precipitation ratio, while summer P decreases moderately (−15%) by the 2080s. Changes in daily extreme events show similar seasonal patterns including increasing daily extreme P events in winter and decreasing P in summer. Growing season P may actually increase, however, despite projected P reductions in the warmest summer months. Regional warming results in decreased heating degree days (−1639 °C days, −32%) and increasing cooling degree days (+318 °C days, +957%) by 2080s, with overall net reductions in energy demand.
Keeping global warming within 1.5 °C constrains emergence of aridification
Chang-Eui Park et al.
Nature Climate Change, January 2018, Pages 70–74
Abstract:
Aridity — the ratio of atmospheric water supply (precipitation; P) to demand (potential evapotranspiration; PET) — is projected to decrease (that is, areas will become drier) as a consequence of anthropogenic climate change, exacerbating land degradation and desertification. However, the timing of significant aridification relative to natural variability — defined here as the time of emergence for aridification (ToEA) — is unknown, despite its importance in designing and implementing mitigation policies. Here we estimate ToEA from projections of 27 global climate models (GCMs) under representative concentration pathways (RCPs) RCP4.5 and RCP8.5, and in doing so, identify where emergence occurs before global mean warming reaches 1.5 °C and 2 °C above the pre-industrial level. On the basis of the ensemble median ToEA for each grid cell, aridification emerges over 32% (RCP4.5) and 24% (RCP8.5) of the total land surface before the ensemble median of global mean temperature change reaches 2 °C in each scenario. Moreover, ToEA is avoided in about two-thirds of the above regions if the maximum global warming level is limited to 1.5 °C. Early action for accomplishing the 1.5 °C temperature goal can therefore markedly reduce the likelihood that large regions will face substantial aridification and related impacts.
Quantifying and comparing effects of climate engineering methods on the Earth system
Sebastian Sonntag et al.
Earth's Future, forthcoming
Abstract:
To contribute to a quantitative comparison of climate engineering (CE) methods, we assess atmosphere-, ocean-, and land-based CE measures with respect to Earth system effects consistently within one comprehensive model. We use the Max Planck Institute Earth System Model (MPI-ESM) with prognostic carbon cycle to compare solar radiation management (SRM) by stratospheric sulfur injection and two carbon dioxide removal methods: afforestation and ocean alkalinization. The CE model experiments are designed to offset the effect of fossil-fuel burning on global mean surface air temperature under the RCP8.5 scenario to follow or get closer to the RCP4.5 scenario. Our results show the importance of feedbacks in the CE effects. For example, as a response to SRM the land carbon uptake is enhanced by 92 Gt by the year 2100 compared to the reference RCP8.5 scenario due to reduced soil respiration thus reducing atmospheric CO2. Furthermore, we show that normalizations allow for a better comparability of different CE methods. For example, we find that due to compensating processes such as biogeophysical effects of afforestation more carbon needs to be removed from the atmosphere by afforestation than by alkalinization to reach the same global warming reduction. Overall, we illustrate how different CE methods affect the components of the Earth system, we identify challenges arising in a CE comparison, and thereby contribute to developing a framework for a comparative assessment of CE.
Recent enhanced high-summer North Atlantic Jet variability emerges from three-century context
V. Trouet, F. Babst & M. Meko
Nature Communications, January 2018
Abstract:
A recent increase in mid-latitude extreme weather events has been linked to Northern Hemisphere polar jet stream anomalies. To put recent trends in a historical perspective, long-term records of jet stream variability are needed. Here we combine two tree-ring records from the British Isles and the northeastern Mediterranean to reconstruct variability in the latitudinal position of the high-summer North Atlantic Jet (NAJ) back to 1725 CE. We find that northward NAJ anomalies have resulted in heatwaves and droughts in northwestern Europe and southward anomalies have promoted wildfires in southeastern Europe. We further find an unprecedented increase in NAJ variance since the 1960s, which co-occurs with enhanced late twentieth century variance in the Central and North Pacific Basin. Our results suggest increased late twentieth century interannual meridional jet stream variability and support more sinuous jet stream patterns and quasi-resonant amplification as potential dynamic pathways for Arctic warming to influence mid-latitude weather.