Distribution of climate damages in convergence-consistent growth projections
Harding,Anthony Moreno-Cruz,Juan Quaas,Martin Rickels,Wilfried Smulders,Sjak
Harding,Anthony
Moreno-Cruz,Juan
Quaas,Martin
Rickels,Wilfried
Smulders,Sjak
Abstract
Climate-econometric estimates assuming that climate changes affect economic growth result in larger projected damages than estimates restricting the effect to economic income levels. We show that the latter is consistent with neoclassical macroeconomic theory by explicitly accounting for income growth convergence in our empirical investigation. We show that accounting for convergence does not statistically change the point estimates capturing climate’s macroeconomic effect, but it has significant implications for assessing the long-term economic consequences of climate change. The magnitude and spread of long-term losses from climate change are reduced. Aggregated damages are found to be convex in the extent of climate change and are projected to continuously increase over time with on-going climate change, in contrast to growth-effects-only estimates where the gains experienced by the winners of climate change eventually surpass the losses incurred by the losers. For example, projections of climate change damages based on climate-econometric estimates by Burke et al., 2015 find that global warming could reduce average global incomes by 20% and drastically increase intercountry income inequality, reflected by a 118% increase in the Gini coefficient in 2100 under RCP8.5. We reestimate and project climate damages under the same scenario accounting for convergence and find global climate damages around 8.5% of global incomes and an increase in intercountry income inequality by 8% in 2100.
Description
Date
2025-09
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Publisher
Research Projects
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Keywords
climate change, economic growth, convergence, Q54 - Climate ; Natural Disasters and Their Management ; Global Warming, O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence, O44 - Environment and Growth, C23 - Panel Data Models ; Spatio-temporal Models, D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement, Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth, SDG 8 - Decent Work and Economic Growth, SDG 11 - Sustainable Cities and Communities, SDG 13 - Climate Action
Citation
Harding, A, Moreno-Cruz, J, Quaas, M, Rickels, W & Smulders, S 2025, 'Distribution of climate damages in convergence-consistent growth projections', Energy Economics, vol. 149, 108705. https://doi.org/10.1016/j.eneco.2025.108705