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Economic impacts of tipping points in the climate system

Author

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  • Dietz, Simon
  • Rising, James
  • Stoerk, Thomas
  • Wagner, Gernot

Abstract

Climate scientists have long emphasized the importance of climate tipping points like thawing permafrost, ice sheet disintegration, and changes in atmospheric circulation. Yet, save for a few fragmented studies, climate economics has either ignored them or represented them in highly stylized ways. We provide unified estimates of the economic impacts of all eight climate tipping points covered in the economic literature so far using a meta-analytic integrated assessment model (IAM) with a modular structure. The model includes national-level climate damages from rising temperatures and sea levels for 180 countries, calibrated on detailed econometric evidence and simulation modeling. Collectively, climate tipping points increase the social cost of carbon (SCC) by ∼25% in our main specification. The distribution is positively skewed, however. We estimate an ∼10% chance of climate tipping points more than doubling the SCC. Accordingly, climate tipping points increase global economic risk. A spatial analysis shows that they increase economic losses almost everywhere. The tipping points with the largest effects are dissociation of ocean methane hydrates and thawing permafrost. Most of our numbers are probable underestimates, given that some tipping points, tipping point interactions, and impact channels have not been covered in the literature so far; however, our method of structural meta-analysis means that future modeling of climate tipping points can be integrated with relative ease, and we present a reduced-form tipping points damage function that could be incorporated in other IAMs.

Suggested Citation

  • Dietz, Simon & Rising, James & Stoerk, Thomas & Wagner, Gernot, 2021. "Economic impacts of tipping points in the climate system," LSE Research Online Documents on Economics 111807, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:111807
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    File URL: http://eprints.lse.ac.uk/111807/
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    Citations

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    Cited by:

    1. Huwe, Vera & Henze, Levi T. & Steitz, Janek, 2023. "16 Gründe für schnelles Handeln: Kipppunkte und ihre Bedeutung für die Klimapolitik," Papers 277908, Dezernat Zukunft - Institute for Macrofinance, Berlin.
    2. van der Mensbrugghe, Dominique, 2023. "Using Python for Parallelization," GTAP Working Papers 6826, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    3. Ameur, Hachmi Ben & Han, Xuyuan & Liu, Zhenya & Peillex, Jonathan, 2022. "When did global warming start? A new baseline for carbon budgeting," Economic Modelling, Elsevier, vol. 116(C).
    4. Charakopoulos, Avraam & Karakasidis, Theodoros, 2022. "Backward Degree a new index for online and offline change point detection based on complex network analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 604(C).
    5. Committeri, Marco & Brüggemann, Axel & Kosterink, Patrick & Reininger, Thomas & Stevens, Luc & Vonessen, Benjamin & Zaghini, Andrea & Garrido, Isabel & Van Meensel, Lena & Strašuna, Lija & Tiililä, Ne, 2022. "The role of the IMF in addressing climate change risks," Occasional Paper Series 309, European Central Bank.
    6. Sureth Michael & Kalkuhl Matthias & Edenhofer Ottmar & Rockström Johan, 2023. "A Welfare Economic Approach to Planetary Boundaries," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 243(5), pages 477-542, October.
    7. Lazarus, Elias & Brown, Clair, 2022. "Improving the genuine progress indicator to measure comparable net welfare: U.S. and California, 1995–2017," Ecological Economics, Elsevier, vol. 202(C).
    8. Hametner, Markus, 2022. "Economics without ecology: How the SDGs fail to align socioeconomic development with environmental sustainability," Ecological Economics, Elsevier, vol. 199(C).
    9. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.t., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," LSE Research Online Documents on Economics 114941, London School of Economics and Political Science, LSE Library.
    10. van der Mensbrugghe, Dominique, 2023. "Using Python for Parallelization," GTAP Technical Papers 6826, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    11. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.T., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," Ecological Economics, Elsevier, vol. 197(C).

    More about this item

    Keywords

    climate risk; climate tipping points; integrated assessment model; social cost of carbon; UKRI fund;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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