The economics of climate change

April 21, 2022

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A new research paper in Vanguard's Megatrends series examines the possible economic effects of climate change.

The Economics of Climate Change: Assessing the Impact of Global Warming and the Transition to "Net Zero" on the Economy looks at the direct physical impact of higher temperatures, the effect of stricter policies aimed at curbing greenhouse gas emissions, and the economic boost from "green investment."

The direct physical impact of climate change will vary across regions, and the growth drag associated with higher temperatures and stricter environmental policies will be offset in part by investment in green infrastructure and technologies.

The authors find that climate change will have a negative estimated net impact on the global economy, with a drag of between 2% and 4% of GDP for smaller temperature increases. Those costs climb to closer to 10% of GDP for global temperature increases above 3 degrees Celsius.

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