IMPACTS OF

CLIMATE CHANGE:

CONSEQUENCES FOR ECONOMIC

GROWTH

Rob Dellink

Environment Directorate, OECD

CIRCLE Ad-hoc expert workshop

Paris, 3 October 2014

• 1st results published

– Economics Department Working Paper

– Used in OECD@100 and NAEC reports

• Continued support from EPOC

– Request to further improve analysis

– Request to prepare report in time for COP21

2

Current status: climate change

Climate change impacts and damages

• Coastal land losses and damages to capital

Sea level rise

• Changes in mortality & morbidity and demand for healthcare

Health

• Changes in productivity of production sectors

Ecosystems

• Changes in agricultural productivity

Crop yields

• Changes in productivity of tourism services

Tourism flows

• Changes in the demand for energy from cooling and heating

Energy demand

• Changes in catchment

Fisheries

• Extreme weather events, water stress, catastrophic risks, …

Not included

3

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

2010 2020 2030 2040 2050 2060

Global GDP impacts (% change wrt no-damages baseline)

Likely uncertainty rangeequilibrium climate sensitivity (1.5°C - 4.5°C)

4

Global assessment

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

2010 2020 2030 2040 2050 2060

Global GDP impacts (% change wrt no-damages baseline)

Likely uncertainty rangeequilibrium climate sensitivity (1.5°C - 4.5°C)

Wider uncertainty rangeequilibrium climate sensitivity (1°C - 6°C)

Central projection

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

2010 2020 2030 2040 2050 2060

Global GDP impacts (% change wrt no-damages baseline)

Likely uncertainty rangeequilibrium climate sensitivity (1.5°C - 4.5°C)

Wider uncertainty rangeequilibrium climate sensitivity (1°C - 6°C)

Central projection

Source: Dellink et al (2014)

5

Stylised analysis post-2060

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Global damages as percentage of GDP

Likely uncertainty range (Business as Usual)

Likely uncertainty range (Committed by 2060)

Central projection (Business as Usual)

Central projection (Committed by 2060)

Central projection (highly nonlinear damages)-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Global damages as percentage of GDP

Likely uncertainty range (Business as Usual)

Likely uncertainty range (Committed by 2060)

Central projection (Business as Usual)

Central projection (Committed by 2060)

Central projection (highly nonlinear damages)-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Global damages as percentage of GDP

Likely uncertainty range (Business as Usual)

Likely uncertainty range (Committed by 2060)

Central projection (Business as Usual)

Central projection (Committed by 2060)

Central projection (highly nonlinear damages)

Source: Dellink et al (2014)

6

Regional results (central projection)

Source: Dellink et al (2014)

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

OECD America OECD Europe OECD Pacific Rest of Europe

and Asia

Latin America Middle East &

North Africa

South & South- East Asia

Sub-Saharan

Africa

World

Global GDP impact (% change wrt no - damages baseline, 2060)

Agriculture

Sea level rise

Tourism

Health

Ecosystems

Energy

Fisheries

Preliminary analysis of benefits of policy

action

• Assessment of benefits of policy action require insight into stream of future avoided damages

– Not straightforward to assess with ENV-Linkages

– Lack of sectoral adaptation information is also an issue

• As first step, use the AD-RICE model which is especially suited for this (as perfect foresight model)

– AD-RICE is an augmented version of Nordhaus’ RICE model, with explicit representation of adaptation

• Look at both adaptation and mitigation policies, and their interactions

7

8

Preliminary results: adaptation policies

Preliminary results; not to be cited or quoted

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Likely uncertainty range - Optimal adaptation Central projection - Optimal adaptation

Central projection - Flow adaptation Central projection - No adaptation

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Likely uncertainty range - No adaptation Central projection - Optimal adaptation

Central projection - Flow adaptation Central projection - No adaptation

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Likely uncertainty range - Flow adaptation Central projection - Optimal adaptation

Central projection - Flow adaptation Central projection - No adaptation

9

Preliminary results: mitigation policies

Preliminary results; not to be cited or quoted

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baselineLikely uncertainty range - No mitigation Likely uncertainty range - Optimal mitigation

Central projection - No mitigation Central projection - Optimal mitigation

Weitzman damage function - No mitigation Weitzman damage function - Optimal mitigation

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baselineLikely uncertainty range - No mitigation Likely uncertainty range - Optimal mitigation

Central projection - No mitigation Central projection - Optimal mitigation

Weitzman damage function - No mitigation Weitzman damage function - Optimal mitigation

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baselineLikely uncertainty range - No mitigation Likely uncertainty range - Optimal mitigation

Central projection - No mitigation Central projection - Optimal mitigation

Weitzman damage function - No mitigation Weitzman damage function - Optimal mitigation

10

Preliminary results: discounting

Preliminary results; not to be cited or quoted

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Likely uncertainty range - Nordhaus discounting Central projection - Nordhaus discounting

Central projection - UK Treasury discounting Central projection - Stern discounting

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Likely uncertainty range - Stern discounting Central projection - Nordhaus discounting

Central projection - UK Treasury discounting Central projection - Stern discounting

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Likely uncertainty range - UK Treasury discounting Central projection - Nordhaus discounting

Central projection - UK Treasury discounting Central projection - Stern discounting

11

Preliminary results: interactions

Preliminary results; not to be cited or quoted

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Optimal adaptation - No mitigation Optimal adaptation - Optimal mitigationFlow adaptation - No mitigation Flow adaptation - Optimal mitigationNo adaptation - No mitigation No adaptation - Optimal mitigation

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Optimal adaptation - No mitigation Optimal adaptation - Optimal mitigationFlow adaptation - No mitigation Flow adaptation - Optimal mitigationNo adaptation - No mitigation No adaptation - Optimal mitigation

-10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

% change wrt no-damage baseline

Optimal adaptation - No mitigation Optimal adaptation - Optimal mitigationFlow adaptation - No mitigation Flow adaptation - Optimal mitigationNo adaptation - No mitigation No adaptation - Optimal mitigation

How to expand the list of impacts that

are covered?

• Extreme precipitation events – Floods, hurricanes

• Extreme temperature events – Heatwaves

• Water stress – But impacts on agriculture already largely included

• Large-scale disruptions – Shut-down of Gulf Stream, collapse of West-Antarctic

ice sheet

• Other discontinuities and tipping points

12

• Q4 2014 / Q1 2015 – Finalise expanded baseline – Revise agricultural impacts – Carry out stand-alone assessment of the literature on

some of the major missing impacts (incl. heatwaves) – Finalise first stylised assessment of benefits of action – Updated report available in time for COP21

• Rest of 2015 – Develop policy simulations in ENV-Linkages – Carry out integrated policy analysis for climate change

and air pollution – If possible extend the range of impacts covered in the

analysis

13

Timeline

THANK YOU!

For more information:

www.oecd.org/environment/CIRCLE.htm

www.oecd.org/environment/modelling