It seems grotesquely unfair, but some of the wealthiest countries in the world, those most responsible for historic greenhouse gas emissions, will enjoy an economic benefit from moderate temperature increases, while the hardest hit will be developing countries—those least able to afford it.
That is the conclusion of an investigation by the International Monetary Fund (IMF) exploring the historical relationship between climate change and economic output in its latest biannual World Economic Outlook released in September.
The IMF analyzed patterns across 180 countries over the past 65 years, identifying the scale of economic impact on a country-by-country basis under a one-degree change scenario. Similar research was published two years ago in Nature that had found that in regions with already hot climates, often low-income countries, any rise in average temperature lowered per capita output over the long term. That paper received wide coverage at the time, as the researchers had in effect found the “optimum” temperature for economic growth. Productivity peaks when a country’s average temperature is 13C. Above or below this temperature, national economic performance declines rapidly.
In the IMF’s outlook, a one-degree increase in a country with average annual temperatures of 25C, such as Bangladesh or Haiti, results in a reduction of per capita output by up to 1.5 percent, a hit that continues for at least seven years. Without global efforts to minimize climate change, the projected temperature increase slices off about a tenth of the per capita output of an average low-income country by 2100.
Almost 60 percent of the world’s population lives in countries that will experience deleterious economic effects. By the end of the century, that number will climb to over 75 percent. This is a result of lower agricultural output and reduced worker productivity from thermal stress effects on physical and cognitive performance of works, which diminishes return on investment.
But some wealthy countries such as the US, the UK, Japan and those of central Europe will see an economic benefit—a slight gain in per capital GDP— from a one-degree increase, as will emerging economy China, albeit a negligible one. This is because being further away from the equator already, they are currently on the colder side of that 13C goldilocks temperature sweet spot. Northerly countries such as Canada, Russia and Scandinavia see a substantial boost. Canada will enjoy an uptick of 0.78 percent per capita GDP, Norway 0.82 and Russia 0.83.
The IMF authors argue that rich countries still need to step up their climate mitigation and adaptation efforts. The boost only occurs for moderate temperature increases, and does not take into account the impact of destabilization and poorer economic performance in the global south. In addition, while they find that domestic policies such as smart infrastructure and technologies such as air conditioning ameliorate the situation up to a point (humid but wealthy Singapore being an example of this), for most low-income countries the cost of this will be a challenge, thus wealthy countries must make greater efforts to financially support such adaptation.
Energy economist Mark Jaccard helped design BC’s carbon tax, and he still supports it. But he questions just how politically viable a stringent tax—at the level needed to meet climate targets—can really be. So he also continues to explore how other policies that the public find more acceptable could work.