Adrien Bilal (Stanford University): The Macroeconomic Impact of Climate Change: Global vs. Local Temperature
Abstract: This paper estimates that the macroeconomic damages from climate change are six times larger than previously thought. Exploiting natural global temperature variability, we find that 1°C warming reduces world GDP by 12%. Global temperature correlates strongly with extreme climatic events unlike country-level temperature used in previous work, explaining our larger estimate. We use this evidence to estimate dam- age functions in a neoclassical growth model. Business-as-usual warming implies a 29% present welfare loss and a Social Cost of Carbon of $1,065 per ton. These impacts suggest that unilateral decarbonization policy is cost-effective for large countries such as the United States.