Publication: A Note on the Economic Cost of Climate Change and the Rationale to Limit it Below 2°C
Date
2010-01
ISSN
Published
2010-01
Author(s)
Abstract
This note highlights a major reason to
limit climate change to the lowest possible levels. This
reason follows from the large increase in uncertainty
associated with high levels of warming. This uncertainty
arises from three sources: the change in climate itself, the
change s impacts at the sector level, and their
macroeconomic costs. First, the greater the difference
between the future climate and the current one, the more
difficult it is to predict how local climates will evolve,
making it more difficult to anticipate adaptation actions.
Second, the adaptive capacity of various economic sectors
can already be observed for limited warming, but is largely
unknown for larger changes. The larger the change in
climate, therefore, the more uncertain is the final impact
on economic sectors. Third, economic systems can efficiently
cope with sectoral losses, but macroeconomic-level adaptive
capacity is difficult to assess, especially when it involves
more than marginal economic changes and when structural
economic shifts are required. In particular, these shifts
are difficult to model and involve thresholds beyond which
the total macroeconomic cost would rise rapidly. The
existence of such thresholds is supported by past
experiences, including economic disruptions caused by
natural disasters, observed difficulties funding needed
infrastructure, and regional crises due to rapid economic
shifts induced by new technologies or globalization. As a
consequence, larger warming is associated with higher cost,
but also with larger uncertainty about the cost. Because
this uncertainty translates into risks and makes it more
difficult to implement adaptation strategies, it represents
an additional motive to mitigate climate change.
Citation
“Hallegatte, Stephane; Dumas, Patrice; Hourcade, Jean-Charles. 2010. A Note on the Economic Cost of Climate Change and the Rationale to Limit it Below 2°C. Policy Research Working Paper;No. 5179. © World Bank, Washington, DC. http://hdl.handle.net/10986/19943 License: CC BY 3.0 IGO.”
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