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Economic models buckle under strain of climate reality

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By illuminem briefings

· 2 min read

Illuminem summarizes for you the essential news of the day. Read the full piece on Reuters or enjoy below:

🗞️ Driving the news: Ahead of climate talks in Dubai, economists are revising estimates on global warming's economic impact, yet critics argue these models fail to fully capture climate damage's extent, potentially leading to policy inaction  
• Record environmental disasters this year have already caused significant financial damage

🔭 The context: Controversy surrounds the use of "integrated assessment models" (IAMs) by economists, which some say underestimate the impact of climate change
•  These models, criticized for their approach to calculating GDP losses and for potentially overlooking rapid environmental changes, have historically influenced significant policy decisions

🌍 Why it matters for the planet: The debate over IAMs highlights the challenge of accurately predicting climate change's economic impact  
• Misrepresenting these risks could lead to insufficient policy measures, exacerbating the climate crisis and its global repercussions

⏭️ What's next: Amidst this criticism, some experts advocate for a broader approach to climate risk assessment, involving collaboration between economists and climate scientists
• The European Union, seen as a climate leader, has an opportunity to adopt this more comprehensive approach in a major climate risk study scheduled for early 2025

💬 One quote: "Economists, speak to climate scientists and come up with results that make sense," urged Thierry Philipponnat of Finance Watch, emphasizing the need for interdisciplinary collaboration in climate risk assessment

📈 One stat: The Nordhaus model, widely used in climate-change IAMs, projects a 3.1% loss in global GDP at 3C warming, while the NGFS model predicts an 8% loss of output by 2050 under a 2.9C warming scenario

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