Editing IPCC:AR6/SR15/Chapter-3 (section)

== Box 3.6: Economic Damages from Climate Change ==

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Balancing the costs and benefits of mitigation is challenging because estimating the value of climate change damages depends on multiple parameters whose appropriate values have been debated for decades (for example, the appropriate value of the discount rate) or that are very difficult to quantify (for example, the value of non-market impacts; the economic effects of losses in ecosystem services; and the potential for adaptation, which is dependent on the rate and timing of climate change and on the socio-economic content). See Cross-Chapter Box 5 in Chapter 2 for the definition of the social cost of carbon and for a discussion of the economics of 1.5°C-consistent pathways and the social cost of carbon, including the impacts of inequality on the social cost of carbon.

Global economic damages of climate change are projected to be smaller under warming of 1.5°C than 2°C in 2100 (Warren et al., 2018c) <sup>[[#fn:r1263|1263]]</sup> . The mean net present value of the costs of damages from warming in 2100 for 1.5°C and. 2°C (including costs associated with climate change-induced market and non-market impacts, impacts due to sea level rise, and impacts associated with large-scale discontinuities) are $54 and $69 trillion, respectively, relative to 1961–1990.

Values of the social cost of carbon vary when tipping points are included. The social cost of carbon in the default setting of the Dynamic Integrated Climate-Economy (DICE) model increases from $15 tCO <sub>2</sub> <sup>–1</sup> to $116 (range 50–166) tCO <sub>2</sub> <sup>–1</sup> when large-scale singularities or ‘tipping elements’ are incorporated (Y. Cai et al., 2016; Lemoine and Traeger, 2016) <sup>[[#fn:r1264|1264]]</sup> . Lemoine and Traeger (2016) <sup>[[#fn:r1265|1265]]</sup> included optimization calculations that minimize welfare impacts resulting from the combination of climate change risks and climate change mitigation costs, showing that welfare is minimized if warming is limited to 1.5°C. These calculations excluded the large health co-benefits that accrue when greenhouse gas emissions are reduced (Section 3.4.7.1; Shindell et al., 2018) <sup>[[#fn:r1266|1266]]</sup> .

The economic damages of climate change in the USA are projected to be large (Hsiang et al., 2017; Yohe, 2017) <sup>[[#fn:r1267|1267]]</sup> . Hsiang et al. (2017) <sup>[[#fn:r1268|1268]]</sup> shows that the USA stand to lose -0.1 to 1.7% of the Gross Domestic Product (GDP) at 1.5°C warming. Yohe (2017) <sup>[[#fn:r1269|1269]]</sup> calculated transient temperature trajectories from a linear relationship with contemporaneous cumulative emissions under a median no-policy baseline trajectory that brings global emissions to roughly 93 GtCO <sub>2</sub> yr <sup>–1</sup> by the end of the century (Fawcett et al., 2015) <sup>[[#fn:r1270|1270]]</sup> , with 1.75°C per 1000 GtCO <sub>2</sub> as the median estimate. Associated aggregate economic damages in decadal increments through the year 2100 are estimated in terms of the percentage loss of GDP at the median, 5th percentile and 95th percentile transient temperature (Hsiang et al., 2017) <sup>[[#fn:r1271|1271]]</sup> . The results for the baseline no-policy case indicate that economic damages along median temperature change and median damages (median-median) reach 4.5% of GDP by 2100, with an uncertainty range of 2.5% and 8.5% resulting from different combinations of temperature change and damages. Avoided damages from achieving a 1.5°C temperature limit along the median-median case are nearly 4% (range 2–7%) by 2100. Avoided damages from achieving a 2°C temperature limit are only 3.5% (range 1.8–6.5%). Avoided damages from achieving 1.5°C versus 2°C are modest at about 0.35% (range 0.20–0.65%) by 2100. The values of achieving the two temperature limits do not diverge significantly until 2040, when their difference tracks between 0.05 and 0.13%; the differences between the two temperature targets begin to diverge substantially in the second half of the century.

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