Macroeconomics

27 October 2015

FEELING THE HEAT 

For years, scientists have been trying to identify a clear link between climatic conditions and economic growth. Analysis out this week shows that national incomes fall, on average, 8.5% for each degree above the golden mean.

In a report published in the scientific journal Nature, researchers at Stanford University correlated temperature and the evolution of GDP in 166 countries between 1966-2010. They noted that the average annual temperature at which countries produce the greatest wealth is 13 °C, or approximately 55.5 °F.

Notably, the study does not make any comparisons between hot and cold nations; rather, researchers looked at annual fluctuations in temperature in each individual country over the period.

When a country’s average annual temperature was above 13 °C, they found that the same country’s economy performed worse in warmer years than in cooler years. In countries with an average annual temperature below 13 °C, the economy performed worse in cooler years than in warmer ones.

As the global climate continues to get warmer, the existing level of inequality between rich, cool countries and the poor, hot ones will therefore become even more pronounced.

Wealthy, cold-weather nations such as Sweden and Canada will in future see their average annual temperatures increase closer to the golden mean, supporting greater economic productivity. At the same time, poor, hot countries will get even hotter and, according to the Stanford study, almost surely poorer.

By the end of this century, according to the Stanford study, “unmitigated climate change will make 77% of countries poorer in per capita terms than they would be without climate change.”

By the same date, if current trends continue, the study predicts that average global income will be 23% lower than it would be without climate change.

Published barely a month before the start of the 21st UN Conference on Climate Change in Paris, which is expected to draw some 50,000 participants, the Nature article has generated headlines worldwide.

Whether such additional evidence of the potentially disastrous impact of climate change will influence policy-makers, however, remains to be seen.