Climate, Economic Growth, and National Preferences for

Geoengineering

Dr Malcolm FairbrotherDr Adam Dixon

School of Geographical SciencesUniversity of Bristol

15 August 2012

ContextIf you could choose a climate for your

country (especially temperature) what would you choose?

choice may soon no longer be amusingly hypothetical, because of geoengineering

even without geoengineering, questions about the consequences of future climate change for the economy

Q1: How do climatic conditions affect the economy?

Context: Geoengineering/Climate Preferences… and Conflicts?climate consequences of geoengineering

(and of climate change generally) are likely to vary cross-nationally

the economic benefits versus costs of geoengineering (including compared to uncontrolled climate change) may therefore be distributed unequally across countries

Q2: Based on a model of the consequences for the climate of different geoengineering scenarios, and a model of climate’s consequences for economic growth, what geoengineering options will different national governments prefer?

Q3: Are differences of views likely to be so marked as to generate unilateral actions and/or international conflict?

Economics of Geoengineeringfew people prefer geoengineering to

mitigation, but…technical feasibility (of various

geoengineering options) is under investigation, and appears to be not far off

financial costs of geoengineering may be lower than those of greenhouse gas emission reductions

mitigation through emissions reductions requires multilateral (collective) action, while geoengineering may be possible for even just one actor unilaterally…a country (with strong

science/engineering capacity)maybe even a corporation or a very

wealthy individual

Costs (and Benefits?) of Climate Change and/or GeoengineeringA. ecological

status quo best (also for ecosystem services)

B. economic1. costs of geoengineering2. costs of transition/adaptation to new

climate3. sea level rise4. weather (fluctuations from climate)5. impacts of climate on growth

Costs (and Benefits?) of Climate Change and/or Geoengineering

1. costs of geoengineering2. costs of transition/adaptation to new

climate3. sea level rise4. weather (annual/briefer fluctuations

from climate)5. impacts of climate on growth

financial implications of 4-5 potentially largest

unless SLR is really substantial… 4 and 5 could have benefits for some

regions, not just costs we focus here on 5, and the question of

how different climates would affect countries’ economic growth rates

Climate and Economystandard (old) observation: cold countries

tend to be rich, and hot countries tend to be poore.g., Montesquieu 1748, Huntington 1915

a few exceptions:North Korea, post-socialist nations (e.g.,

Mongolia)Singapore, small oil-rich nations (e.g.,

Qatar)renewed interest in the impacts of

climate/natural geography on economic growth and incomespartly, but not only, because of climate

changenew datasets, methodspolicy implications (e.g., aid for African

development?)

Climate and Economy: LiteratureJeffrey Sachs and collaborators:

Africa (e.g.) is poor partly because of climate/natural geog

proximity to coast/navigable rivershealth burden of tropical disease

(especially malaria)also parasitic, disease, etc., impacts on

plants, livestockpolicy implication: foreign aid for specific

climate-counteracting measures (e.g., mosquito nets, agricultural productivity-enhancing technology)

method: cross-sectional regressions with countries as units, and GDP/capita as the outcome

Climate and Economy: A Caveatso is “colder always better”? maybe, but

maybe not…historically, climate/natural geography led

to cross-national differences in key economic, political, and social institutions

institutions have been a (some say the) primary source of cross-national income differences (see Rodrik, etc.)

absence of corruptioncapable public administration, law

enforcementeffective public education and health

servicesetc.

alternatively, maybe European colonialism simply exploited the hot world to the (enduring) advantage of the cold

Climate and Economy: A Caveatimplication: climatic differences across

nations are collinear with national-level conditions that could be the real determinants of (growth rates in) living standardsrisk of naïve interpretations of regressions

of income on climatic variableshow then to control for potentially

confounding national-level variables?

Climate and Economy: Finer Scaleone solution: draw contrasts within

countriesand within-country analyses have two other

advantages:1. climatic averages for large countries are

dubious exploit disaggregated data

2. if we want to know, counterfactually, how a region would be affected by a different climate, comparing it to another in the same country controls for lots of things

even if the climate were to change, many other things probably wouldn’t (culture, political system…)

Climate and Economy: LiteratureDell, Jones, and Olken (DJO) 2009:cross-sectionally, warmer temperatures are

correlated with lower per capita incomes…not just across countries (-8.5% per 1°C

rise),but also within them,and even within regions within countries

data: municipal-level, from 12 countries in the Americas

all this “suggests that omitted country characteristics are not wholly driving the cross-sectional relationship between temperature and income”

so again, for human welfare, is “colder always better”?

Climate and Economy:From GDP/capita to GDP/km2

Nordhaus 2006 (etc.):produced a “G-Econ” dataset with

estimates of economic activity for 1° by 1° land gridcells in 1990 (N = ~20,000)

“Gross Cell Product” (GCP), not per capitakey findings:

temperature again the most important climatic variable

per area instead of per capita, higher temperatures are correlated with more output, not less, and non-linearlyoutput/area peaks at about 12°C

most economic deserts are not hot, but cold (e.g., Canada)

method: cross-sectional correlations of climate with GCP

Nordhaus: A “Climate-Output Reversal”

GDP/area:rises with temperature, then declines past ~12°C

GDP/capita:declines

monotonically with

temperature

GDP/capita and GDP/km2at the national level, GDP/capita is probably

the greater concernbut within countries, differences in the

concentration of GDP in different areas may tell us something about where people want to livepopulation movements may reflect

human security, economic opportunities, climate-related quality of life

national climate/geoengineering preferences could therefore reflect impacts on either GDP/capita or GDP/km2we consider both

Weather and the Economyother studies look not at climate, but the

effects of weather (year-on-year fluctuations, drought, etc.)

some studies say precipitation matters more than temperature, others the opposite

e.g., DJO 2012: +/-1°C fluctuations increase/reduce GDP growth by 1.3% (not just the level of GDP)though only for poor countries, not richand by many means, not just through

effects on agriculturee.g., political instability

Existing Models: SummarySachs, Nordhaus, DJO 2009, others: cross-

sectionallimitation: growth over time ≠ cross-

sectional differencesalso limitations of many studies because

only national-levelDJO 2012, others: fluctuations from the

norm over timelimitation: dismisses the norm (what if

the norm changes?)

Our Modelling Strategywe investigate how economic production

changes (grows) over time, and varies cross-sectionally, treating production as a function of time-invariant climate characteristics1. at the national level (differences among

nations)2. at the sub-national level (differences

within nations)model GDP growth using a multilevel

“growth curve”interact time-invariant X variable of

interest with timeallow for potentially non-linear

relationships, and cross-national heterogeneity, using random slopes

Multilevel Modellingfour-level multilevel model, with cell-years

(i) cross-classified in cells (c) and country-times (t), and cells and country-times in turn both nested within countries (j):

mean-centre each covariate by countryproduces (e.g.) mean temperature by

country, and difference between gridcell temperature and country mean

Dataclimate data from Irvine et al.

based on HadCM3L, a Met Office Hadley Centre atmosphere-ocean general circulation model used in the IPCC’s Third and Fourth Assessments

geoengineered climate scenariosnational-level economic data from the Penn

World Table 7.0gridcell data from G-Econ project (Nordhaus

et al.)four waves: 1990, 1995, 2000, 2005billions of current USD (market exchange

rates)observations on 19,365 gridcells in 174

countriesa small number excluded (offshore,

etc.)

Coefficient Estimate (* p < 0.05) Estimate (* p < 0.05)

(Intercept) 17.4* 18.0* FixedEffects Coefficients

poly(dprec,2)1 58.2* 48.0*

poly(dprec,2)2 -63.1* -74.1*

time 0.110* 0.129*

poly(dtemp,2)1 367* 173*

poly(dtemp,2)2 18.8* -44.7*

poly(cm.temp,2)1 249* 98.3

poly(cm.temp,2)2 -393* -344*

time:poly(dtemp,2)1 6.38* 2.59*

time:poly(dtemp,2)2 -1.75* -4.81*

time:poly(cm.temp,2)1 19.3* 8.17*

time:poly(cm.temp,2)2 -1.86 -0.726

RE Gridcell 8.66 7.07 Random Effects Variances

RE Country-Year 0.05 0.04

RE Country 4.69 4.33

RE Residual 0.15 0.17

# countries 173 (all) 152 (no big oil producers)

Outcome: Gross Cell Product

Coefficient Estimate (* p < 0.05) Estimate (* p < 0.05)

(Intercept) 8.57* 8.61* Fixed Effects Coefficients

poly(dprec,2)1 -4.28* -5.39*

poly(dprec,2)2 4.31* 4.46*

time 0.08* 0.09*

poly(dtemp,2)1 -28.26* -5.43*

poly(dtemp,2)2 -14.49* 2.87*

cm.temp -0.06* -0.07*

time:poly(dtemp, 2)1 1.95* 1.56*

time:poly(dtemp, 2)2 -0.57* -1.21*

time:cm.temp 0.00 -0.00

RE Gridcell 0.24 0.17 Random Effects Variances

RE Country-Year 0.05 0.04

RE Country 3.01 2.69

RE Residual 0.02 0.01

# countries 173 (all) 152 (no big oil producers)

Outcome: Gross Cell Product Per Capita

Conclusions/Implicationsgrowth within countries may be… like

Goldilocks?appears to hold either per capita, or in

absolute termsfor some countries, the economic

implications of “predictable” climate change may be… positivemany countries are better off (in terms of

predicted growth in human standards of living) in a “warmed” scenario

does imply potential international conflicts over interest over geoengineering

A Final Caveatthis analysis addresses the economic

implications of changes in the typical climate of a place… not the weather

sea level rise, extreme weather events (droughts, storms, etc.), and increased year-on-year climate variability all have potentially huge costs

those potential costs, compared to the small relative costs of greenhouse gas emission reductions, still imply an aggressive climate mitigation strategy (e.g., a $30/tonne price for CO2)EU Emissions Trading System, British

Columbia carbon tax