Vers une société résiliente au changement climatique / Building a Climate Resilient Society : colloque organisé dans le cadre de l’initiative « Avenir Commun Durable »
Conférence du 25 janvier 2024 : Economic Consequences of Climate Change
Session 2: The Cost of Climate Change, and Opportunities for Green Growth
Intervenante :
Professor Elizabeth Robinson, The London School of Economics and Political Science
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Uh thank thank you let me thank you so much for um inviting me to be a part of this um group it’s a it’s interesting I think the the the the overall title of this this two-day Gathering is building a climate resilient Society I think
Yesterday we heard a lot about um how we can be more energy efficient and reduce our emissions through energy and today our two speakers started introducing the other side of being resilient society which is adapting to the climate change that’s already happening and already
Built in and so um and so I was asked to talk about The Economic Consequences of climate change and I’ll start to talk about that but then I’m going to change the exam question slightly because um you’ll get the sense of why I’m frustrated with um economists talking
About this and I’m an economist and we’ve already had a joke about economists yesterday and um I’ll probably bit be a bit self-deprecating about economists today but I um I think with good reason so um so I thought uh we had we had a lot of true history yesterday from Professor
Harper so I’m going to give the economics of climate change um version of history and go back just sort of a couple of decades but interestingly I thought you know when I was when I I had the sort of title of this talk I thought
Well um you know if you go back to 2015 the oecd wrote uh a paper title The Economic Consequences of climate change and actually um Royal Society and I was a part of this did a very nice event a year ago you might not be able to see
This but it says The Economic Consequences of climate change and I thought um I don’t normally put lots of text on slides but I thought it’s quite important for us to just see what was being said just N9 years ago um and you’ll sort of see why I say this but
What what the report says if we if we carry it on as usual the combined negative effect on global annual GDP could be between 1 and 3.3% by 2060 and if it keeps warming to 4 degrees above pre-industrial levels GDP might be hurt by between 2 and 10
Degrees relative to a no damage scenario now if you read the detail of this long report it does give a lot of it does say well you know there could be tipping points and there could be extremes and there are other other factors consider
But when I look at that I don’t get too worried it seems quite benign because it’s not even saying that it’s going to be one or 3 degrees 3% GDP lower than today it’s like we’re going to see a growth pathway until 2060 and with climate change it’s just not going to be
Quite so Steep and you could look at that and go well I’ll just keep on with my lifestyle and maybe I’ll eat a little less meat and maybe I’ll fly a little less maybe I won’t and so um it sort of lulls one into a false sense of security
In a way okay we’re going to jump forward three years to the Nobel Prize Nord house was mentioned yesterday lots of good work by nordhouse but let’s ask ourselves what nouse sort of sort of concluded which was 2.7 to 3.5 degrees of warming is optimal for the global
Economy and again that’s like okay so um we’re sort of heading about there we might be doing a little bit better so again do we really need to worry and um and if we think about where these numbers come from so um Nord house and his um fellow economists and many people
Today still work with these large um models of the economy and so you have lots of and I’m paraphrasing dreadfully so you know to the economists here I’m paraphrasing very much but but basically we have um we have models of the economy and we can think of different sectors
And at the heart of these models are production functions so if we look at agriculture for example we can say what what what how do we consider agricultural output will we think about inputs such as labor and land and capital and then we might ask ourselves well how might climate change affect
That and we say ah well it might affect crop yields and it might affect labor productivity and how we tackle climate change well it might affect energy supply for example and so how we link the um the biophysical of climate change reality with economics is we look for some kind
Of damage function and economists like elegant models and I’m I’m a theorist at heart I’m a theoretical modeler Economist and we look for elegant models and we look at the data and we say okay a a quadratic damage function um fits about right the data so what does that
Mean it says that as we have warming we expect a damage and the sort of curve looks something like this and we can put that damage function into our models and then where how do we get to an optimal amount of warming well we know that warming um through the damage function
Is going to cause a negative impact on GDP but we know that tackling climate change as well can be costly and so we look for the marginal benefit equals marginal cost and tells us that somewhere around 3 degrees of warming is optimal again I’m sort of feeling quite
Fine I mean this these numbers came out well before 2018 but that’s when the Nobel Prize came so the same year once a month on a Friday many of our children walked out of school on Fridays and started protesting and these were the first school strikes for climate the Greta tber started in
2018 so we might be wondering if if all we really have to worry about is GDP falling slightly lower than it would otherwise have been um why are the kids coming out and telling us their Future’s at stake and that that it’s worth them um missing education to protest what’s happening to
The planet and so we sort of found ourselves in this interesting situation where the economists are telling us that there’s some optimal warming of around 3° and the climate scientists are telling us that it’s going to be absolutely disastrous if we don’t limit warming to below 2 degre and so there’s
Even though the economics and the climate science is linked by the damage function so there is some linkage between that we seem to see the economists so far from where the scientists are telling us and it’s interesting because the economists there’s no concept of livability in the models and the and the
Economic models and what’s reported is the averages and the extremes and the possibility of tipping points um are basically sort of ignored and then if we look at the scientists there’s nothing really to do with economics it’s all about what is a livable planet and it’s all about basically a precautionary
Principle and avoiding the absolute worst and so very different approaches are taken and um and that’s why when I master to talk about The Economic Consequences of climate change I feel a little bit uncomfortable because I think as economists we haven’t really done well enough to talk to the science
Community now we’re doing that now and that’s why the royal so had this meeting that brought together climate scientists and economists to discuss um how we could work much better together but I think um it’s really important to remember that this limit that now we’re all talking about Net Zero by 2050
Limiting emissions to well below two degrees ideally 1.5 but well below two otherwise um has no economics in it and so um and so I think um if we think about where we really are in 20 oh it went wrong the four should be next to
The 20 that is 2024 if we think about where we are now what we really want to think about is a 26-year trajectory and again economists aren’t great looking at trajectories they tend to like um static equilibria um but but but everything is going to be changing for the next 26
Years um if all goes to plan and we do actually manage to hit Net Zero and we heard a lot of great stuff yesterday about how hopefully we can do that um partly through energy and we’ve heard um our two speakers this morning talk about how France and the UK are ratcheting
Down their carbon budgets to reach Net Zero by 2050 but even if we get all that right we’re also going to have to increase adaptation of resilience if we want to reach a livable future in 2050 so and so there we’re going to have to think about mitigation adaptation and
Arguably and I think baroness Brown raised this we’ve got to start thinking about integration and mitigation in an integrated way and if we think about where most of the population on the planet lives they don’t live in oecd countries they live in low middle- inome countries and if we think about the
Poorest countries there’s actually almost nothing to mitigate in those countries so talking about mitigation versus adaptation doesn’t really make sense for the poorest countries so for those countries what we need is a focus on resilient growth Pathways and this is a mouthful but I haven’t found a more concise way to say it
Resilient growth Pathways that are compatible with a global net zero and so we really thinking at the very poorest countries they still very much need economic growth because arguably that’s the best way to to be adapted and resilient to climate change if we look at why rich countries at the moment cope
Better than poor countries it’s just much easier when you got a bit of money and so um with the low-income countries we still need to very much focus on poverty reduction and increased Prosperity we can argue in high income countries about whether we have reached
A postgrowth era or will do soon um in terms of how we measure growth and how we focus on GDP but but just to stress the cop commitments um are led by science but they’re so difficult to um enact an individual country because what we’re looking at is a global public good
When we’re talking about reducing our emissions so um so that’s just a sort of framing of um how I think it helps as an economist to actually think about about the next 26 years that it’s very much a trajectory that we’re thinking about and so um as I said just to change the
Question slightly it’s good to talk about The Economic Consequences of climate change and I’m going to talk about them in the next few slides in a different way but we might also want to talk about just the consequences of climate change and then we might think about what are The
Economic Consequences of tackling climate change or what are the economics of climate change adaptation and ultimately what’s the economically optimal Pathway to Net Zero so the science has told us we need to get to Net Zero but there’s lots that economists can do to say what is the
Best way to get there and I think what a lot of these um integrated assessment models they talk about but very sort of soov is all issues of inequality distribution um climate Justice that we hear so much about are hidden and actually when we think about the economics of climate change and the
Impacts of climate change they vary very considerably and there’s so many distributional impacts and again that’s something that I think economists can really contribute to so um we can already demonstrate that climate change has had an impact on GDP per capita and so um if we think back
Again to the sort of the the nous type integrated assessment models these are all looking forward what is the likely impact of climate change in the future and maybe 20 years ago it sort of made sense to talk about climate change in the future but what we’ve seen already
From many of the presentations and I think coren’s um presentation showed that very clearly is just how many impacts are already occurring now the scientists are doing fantastic work with the um weather attribution um work that Professor Dr Freddy Otto is doing for example and so there with the um weather
Attribution we can attribute um weather outcomes and say to what extent these extreme weather conditions that we see can be attributed to climate change but increasingly what we’re starting to be able to do as Economist is attribute the socioeconomic outcomes so this is work that um I’ve been working with a
Colleague Dr sh description I he does the really complicated econometrics I stay being a theorist on this but what we can actually show that if we track the data in southern Europe versus northern Europe that GDP per capita growth is already being negatively affected in high exposure sectors in southern Europe interestingly in
Northern Europe it looks like there’s there’s no sort of um statistically significant impact or possibly increasing and and so this is using econometric approaches we have panel data and we’re looking compared to a reference period of 1981 to 2020 2010 sorry so that’s and and it kind of makes
Sense doesn’t it if we think about what the high exposure sectors are that’s agriculture construction um I not sure if I’ve listed them there um Agriculture and construction mainly um that people are working outside exposed to the Sun so we know that the global warming has occurred and we saw that it’s actually
Been greater the warming temperatures um in Europe and we know how labor Supply responds for example to um to heat and I’ll show that in a minute so um so already we can actually show that climate change is having effect on GDP per capita growth I you know do we do we
Believe the causality here we think it’s pretty plausible um from the from the regressions we running the econometrics we’ve been doing but this is very nent early stage research but it um it looks pretty robust oh there we go so um so so we can
Sort of dig down a little bit so we’ve also studied specifically how global warming affects labor Supply and again this is in the high exposure sectors agriculture construction Mining and quaring and again what we can see is this pattern that in southern Europe it looks like labor Supply is having it’s
Having negative impact and in the cooler countries in northern Europe it looks like it’s having a slightly positive impact and so we can actually um estimate the number of um hours per worker that have been reduced due to warming uh we don’t have the UK in this because um this project is Horizon
Funded and at the time people weren’t covering the UK data so we did look separately at the UK and I know it’s quite it’s quite a small figure but this here here I’ve actually plotted what the optimal temperature is for predicted work working hours and this sort of
Explains why we see in warmer countries that warming has a negative impact on labor and then in colder countries it has a um positive impact and so the UK it’s sort quite interesting that we do see quite a divide between the Northern parts of the UK and the southern parts of the
UK so um so so we can start to use economics um I think in quite interesting ways um and look at The Economic Consequences of climate change we can look at GDP per capita and we can break it down for example to labor supply of course um as I sort of
Intimated at the start it’s not necessarily the economics that we care about so much but it’s the impact on people and so whilst we can calculate some of these sort of economic impacts we’ve also looked at some of the other costs um human costs of climate change
So here we’ve um again using econometric techniques we’ve um been able to attribute uh food security outcomes to climate change so again we’re looking backwards so this is impact that have already happened due to climate change and we can control for Heat Wave and drought and this is these are global
Data so the data come from um FAO it’s the for those who are interested is f data which is the food insecurity experience scale that we have for most countries each year um FAO adds more countries and so what we can see not only is climate change affecting food
Insecurity but the impact is increasing each year which is I think particularly worrying a WI do we see a greater impact from heat waves than drought uh this this we think um is because food insecurity the the drivers act not just through food production but also through
Access to food and so when it’s particularly Hot For example some people may not be able to work so well um uh whether that’s in the agriculture sector or in other sectors another thing that we’re increasingly sort of interested in as economists um and it links back to the
Sort of impact on labor is um how we protect people so what we do about this so it’s all very well presenting the data but um how do we actually um build a more resilient labor force and so by understanding the impact of heat on food security or the impact of heat and
Climate change on the labor force we can start to think about how we can build adaptations and there’s I think there’s some particular challenges here um that economists probably can contribute to so something that I’ve sort of been particularly interested in is the gig economy and so these are people who um
Are self-employed and so for example it could be the person who gets on their bicycle on um in the UK we have Uber Eats and deliver and they get on their bicycle and they they pick up your takeaway from a a restaurant and they bring it to your house and if we think
About it what happens to those people um when when there’s a heat wave so if we think about what happens when I wake up in the morning as part of the gig economy and I sort of have to decide um I know it’s probably bad for my health
To be cycling around at high speed trying to deliver so do I compromise my income by taking on fewer jobs or even actually not working that day because I know being outside um exercising is dangerous or do I take on those jobs to protect my income but knowing that I
Could harm my health and it’s and we’ve got an increasing gig economy in the UK and quite likely in other countries too and I don’t think we’ve really started to think about how we protect workers in these situations so um labor force has come up a lot there was a question about
You know what we do about the labor force in a as we transition for example what’s happening in Port tolber in the UK at the moment with over 2,000 people losing their jobs um and so there’s I think the labor issue is really problematic because we’ve got the green
Transition and what that means for jobs but we also have the people who may have jobs that are carbon neutral for example in the gig economy or people who are outside and working outside whose health is going to be compromised um by climate change we need to think about how to
Protect those people who still have jobs but are being harmed by climate change in that way and building those protections it’s it’s not obvious how you do that for people who are self-employed or work for peace work so um so like I said change you know changing the um the the exam title
I thought well I’ll just T touch a little bit on the economics of tackling climate change I know we’re going to have a talk later about air pollution so I I’m nervous I’m going to steal anyone’s Thunder but I so I wanted to specifically stick to what we can say
About the economics of tackling things like um air pollution and so I sort of I I looked around the literature to say you know how much information is there that would be useful to a Ministry of Finance because I do feel that if we think about talk about the economics of
Climate change we can give the big numbers but actually if governments are trying to figure out what to do um it would make sense that we can sort of offer them clear plans as to if you invest here or if you spend here this is going to be the economic payback and so
It sort of seems to make sense um to reduce air pollution so if we look at the data this was just one study in oecd countries but the study suggested an air pollution strategy costing around 0.01 to 0.02% of GDP saves around 5% or more
Of GDP so that sounds like a really big payback but actually a lot of that um value in terms of GDP is due to increased life expectancy now um that that’s um something that we should aspire to but it doesn’t necessarily change the bottom line um for a
Government and actually the the really depressing thing is that if we think about deaths due to heat deaths due to heat um almost exclusively in the over 65s of people with pre-existing health conditions so if we actually look at the impact um on GDP of sort of wiping out
You know older people and people with pre-existing conditions it’s not obvious which way that goes and so just looking at the economics again is rather depressing but for example with air pollution we might be much more interested in how it takes the pressure off our health services for example and
It might be much more interested in the extent to which if we reduce um air pollution people are just going to be in general less sick and more able to work but these are gain of examples where um when we talk about The Economic Consequences of tackling climate change
I think there’s a lot more scope to be doing work in areas like this um I think it was baroness Brown um Julia who mentioned Urban green spaces but again the the economics of urban green spaces are quite interesting um again I Look to say to myself you know
Who is actually looking at um the value of um Urban green spaces and it’s really hard to find what I would call useful economics and by useful economics I’m thinking uh the kind of Economics again that you can give to your government your minister of finance and say it
Really makes sense to invest here and so um first of all why do we really like Urban green spaces well um urb green spaces and mangroves are the sort of poster children of bringing together adaptation and mitigation along um along transition Pathways because they have very clear mitigation benefits and they
Have very clear adaptation benefits and so if we think about um Urban green spaces we know there are mental and physical health benefits we know there’s carbon sequestration and then we know there’s local cooling so we’ve got um heat adaptation we’ve got mitigation and so um how do we actually cost these out
Well figuring out how much they cost um is relatively easy uh figuring out the benefits a little bit harder but I found this study and I thought it was quite interesting because um this is just one particular Park in the northwest of um England I think it’s in the WHL which is
Near Liverpool for those of you who know the area called Port Sunlight River Park and the local Authority quite sensibly was trying to justify the economic benefits of investing in a green space and so the cost the cost of investing in this park was 3.4 million and they were
Looking to how they could value the benefits and so they said that um there was a 7.8 million pound increase in property values and this is what economists do a lot um if we do valuation studies if there’s any economists here um one of the proxies we
Use um for how valuable something is we can say well looks look at the prop value of property for example near Green spaces versus further from often we’d look at it if you know what is the value of property near um Industrial Waste areas for example if we want to look at
The negative value of those but I do think to myself um is it really great that the value of property’s gone up um so it’s great if you’re in one of those houses when you sell it not so great if you’re trying to get on the property
Ladder um so um just it’s just sort of some examples of why there’s lots of economists looking at trying to Value um things that are linked to tackling climate change but it’s not obvious we’re doing it the right way um but what’s nice about this is they also
Looked at sort of annual revenue generated locally I think it would be great if we could sort of look at the benefits in terms of the health benefits I think there’s a lot of traction for economists to start looking directly at for example um I think it’s because I
Work on health and climate change that I think a lot about this but um how much um we can take pressure of our health services which has so many knock-on effects so I just wanted to use my last um few minutes just oh that one didn’t work either Lost in Translation I just
Wanted to use my last few minutes to talk about the economics of adaptation uh because I think it’s really tricky and I think just as baroness Brown said that you know the government has sort of given this target of a fully adapted economy um the economics of um climate
CH adaptation is similarly we’re just not quite there and first of all I would say that we probably don’t want to be fully adapted because in general I think any Economist when they look at the marginal costs and marginal benefits we never want to be fully anything um many
Decades ago I did my PhD on optimal enforcement and we certainly didn’t want full enforcement of stuff because at the margin the marginal costs um of getting that extra bit of um adaptation probably outweigh the marginal benefits and so I think what climate change committee and the work under baress Brown is looking
At which is more about oh can we be well adapted to a certain risk is much more sensible and so when we look at the economics of um climate change adaptation a lot of the work has focused on cost benefit analysis and there’s nothing wrong with cost benefit analysis
But in in a way it’s sort of it has the same problem as people who’ve been looking using these economic models to look at The Economic Consequences of climate change when they sort of give us one number it hides a multitude of sins
Um and it and and and I think um it it hides what we really probably care about which is again is the extremes so what we probably are particularly worried about is the low probability high-risk um events high cost events sorry and how we can tackle those but also I think
Cost benefit analysis can give us a number and we could probably get similar cost benefit numbers with very different approaches to um how we can invest in adaptation resilience and so we saw this um in Baron’s Brown slide as well but if we think about risk risk is the fun a
Function of Hazard vulnerability and exposure and when we tackle adaptation our entry points as policy makers can be any of those so if we think about flooding we can actually um even though we know that flooding is going to be potentially worse because we’re just getting more extremes of weather we can
Tackle the hazard by um by thinking about what happens when water lands um on the ground because at that point the precipitation lands whether we flood or not depends where that water goes we can also think about the exposure because then we’re looking at where people live
Why are people living on flood Plaines um and are they just are they Expos or can they for example as we’ve seen in the UK people have now started building large fences walls around their property and pumping out water or building their houses on stills or do we tackle vulnerability so even if
You’re flooded are you vulnerable and each of those ways we tackle affects who is going to benefit from the investment in adaptation and how and so a classic sort of example people think about a lot is are we going to invest in adaptation by working with nature or are we going
To invest in adaptation by working against nature and building a barrier to Nature cost benefit analysis doesn’t allow us to engage in that conversation about a what a well adapted society looks like do we want to look like a very hot country like Dubai where we all
Live in bubbles in air conditioning or do we want to adapt so we can actually have a livable Outdoors um and fortunately that’s my last slide so thank you very much thank you very much you want to come up and put Your