Economic Implications of Anthropogenic Climate Change and Extreme Weather

In my ten years living in Madison, this has been the coldest thus far. Keeping in mind everything is probabilistic, it’s likely that I have anthropogenic climate change to thank for experiencing this event. [1] [2] [3] (Just like one can’t say Hurricane Sandy was directly a result of global climate change, the likelihood of such events rises with global climate change.)

Tabulating Climate Change

From NASA via RealClimate comes this graph of annual temperatures taking into account El Nino and La Nina phenomena:


Figure 1: The GISS data, with El Niño and La Niña conditions highlighted. Neutral years like 2013 are gray. Source: NASA.

This figure illustrates that while temperatures vary with the El Nino and La Nina phenomena, allowing for a mean shift, one sees a clear pattern toward overall warming temperatures (notice no hiatus once looking at the data in this fashion). Now, while the annual averages are rising, global climate change models imply greater climate variation as well. (I’ve discussed the greater dispersion in temperatures in summer months here, that is spread as well as mean change.) NOAA has generated indices to measure climate extremes; components are reportedhere.



Figure 2: U.S. Climate Extremes Index (CEI). Source: NOAA, accessed February 16, 2014.

The data indicates that extreme high/low temperatures and extreme precipitation are rising in frequency.

Economic Implications, Again

I was thinking (again) about the economic impact these extremes as I was contemplating Representative Marsha Blackburn’s twofold (and seemingly internally inconsistent) assertion today that there was no consensus on anthropogenic climate change, and even if there were, we should think about all the positives that would come about from an upward shift in the mean and increase in support of the distribution of temperatures in the United States (maybe there’s an upside to West Nile fever! [4]).

Here are the immediate impacts (Informal poll: How many people had trips cancelled because of the weather this Winter? I’m the first vote yes).


Figure 3: Flight cancellations in the United States. Source: NY Times.

I wonder if any of those who argue better to adjust than to try to price carbon and were caught in those flight cancellations reconsidered there positions. That’s only partly facetious; I think climate change is going to impose substantial costs going forward, a lot more than just damage to sewer pipes and salt bills. [4]

These costs include power outages, estimated by CEA/DoE.


Figure from Economic Benefits of Increasing Electric Grid Resilience to Weather Outages (August 2013).

The Consensus on Anthropogenic Climate Change

As I mentioned earlier, Representative Blackburn argued that there was no consensus on the sources of climate change. I beg to differ — as do scientists themselves.

Here are the key graphs from “Expert credibility in climate change,” Proceedings of the National Academy of Sciences (2010). Note that UE denotes unconvinced; CE denotes convinced (by the thesis of anthropogenic climate change).


In other words, the climate scientists that are better published tend to be convinced of anthropogenic climate change; moreover, the ones that are better cited also tend to be more convinced of ACC. More in this post.

Another study, with similar results, from Eos (The Transactions of the American Geophysical Union) is here. The climatologists publishing on climate change tend to be the most convinced of anthropogenic climate change (97.4%, which in my book is pretty overwhelming).

A Time Series Analysis

Since Econbrowser has a large audience of people interested in economics, I thought it useful to post estimates of the human-activity-related component of global climate change (on average, warming), from a well-known econometrician. From Kaufmann, Kauppi, and Stock, “Emissions, Concentrations, and Temperature: A Time Series Analysis,” Climatic Change (2006):


Figure from Kaufmann, Kauppi, and Stock, “Emissions, Concentrations, and Temperature: A Time Series Analysis,” Climatic Change (2006).

The graph can be read as follows: Solid gray line is actual, gray dot-dash-dot line (the one plunging) is the component of temperatures due to natural factors, gray dash line is fitted values, and the black dotted line is the component due to human activity. The predicted values are generated from a fairly simple four equation simultaneous equations model, so economists can understand the approach.

For those who might not be aware, James Stock is well known econometrician, who has contributed to the unit root testing, cointegration and macroeconometrics literature. (He’s ranked 32 at IDEAS, if you were doubting his credentials.)



Returning to Representative Blackburn who plea for a cost-benefit analysis, I turn to a real expert on the subject, William Nordhaus. I am not sure what she means by cost-benefit is what Profsesor Nordhaus means.

This piece is cross-posted from Econbrowser with permission.

One Response to "Economic Implications of Anthropogenic Climate Change and Extreme Weather"

  1. benleet   February 22, 2014 at 1:15 pm

    " But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, and floods – all are now more frequent and intense." Barack Obama, State of the Union, Feb. 2013.
    Chasing Ice — a documentary one the web of time-lapse photography of melting ice sheets in Greenland, Alaska, Iceland. —
    The Sixth Extinction, read the review by Al Gore, 20% to 50% of species expected to become extinct in 100 years: