Nobel prize-winning economics of climate change is misleading and dangerous – here’s why
While climate scientists warn that climate change could be catastrophic, economists such as 2018 Nobel prize winner William Nordhaus assert that it will be nowhere near as damaging. In a 2018 paper published after he was awarded the prize, Nordhaus claimed that 3°C of warming would reduce global GDP by just 2.1%, compared to what it would be in the total absence of climate change. Even a 6°C increase in global temperature, he claimed, would reduce GDP by just 8.5%.
If you find reassurance in those mild estimates of damage, be warned. In a newly published paper, I have demonstrated that the data on which these estimates are based relies upon seriously flawed assumptions.
If you find reassurance in those mild estimates of damage, be warned. In a newly published paper, I have demonstrated that the data on which these estimates are based relies upon seriously flawed assumptions.
Nordhaus’s celebrated work, which, according to the Nobel committee, has “brought us considerably closer to answering the question of how we can achieve sustained and sustainable global economic growth”, gives governments a reason to give climate change a low priority.
His estimates imply that the costs of addressing climate change exceed the benefits until global warming reaches 4°C, and that a mild carbon tax will be sufficient to stabilise temperatures at this level at an overall cost of less than 4% of GDP in 120 year’s time. Unfortunately, these numbers are based on empirical estimates that are not merely wrong, but irrelevant.
Nordhaus (and about 20 like-minded economists) used two main methods to derive sanguine estimates of the economic consequences of climate change: the “enumerative method” and the “statistical method”. But my research shows neither stand up to scrutiny.
The ‘enumerative method’
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