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Future heat stress to reduce people’s purchasing power
With increasing carbon emissions rising temperatures are likely to impact our economies and societies profoundly. In particular, it has been shown that heat stress can strongly reduce labor productivity. The resulting economic perturbations can propagate along the global supply network. Here we show, using numerical simulations, that output losses due to heat stress alone are expected to increase by about 24% within the next 20 years, if no additional adaptation measures are taken. The subsequent market response with rising prices and supply shortages strongly reduces the consumers’ purchasing power in almost all countries including the US and Europe with particularly strong effects in India, Brazil, and Indonesia. As a consequence, the producing sectors in many regions temporarily benefit from higher selling prices while decreasing their production in quantity, whereas other countries suffer losses within their entire national economy. Our results stress that, even though climate shocks may stimulate economic activity in some regions and some sectors, their unpredictability exerts increasing pressure on people’s livelihood.
Post-Brexit no-trade-deal scenario: Short-term consumer benefit at the expense of long-term economic development
After the United Kingdom has left the European Union it remains unclear whether the two parties can successfully negotiate and sign a trade agreement within the transition period. Ongoing negotiations, practical obstacles and resulting uncertainties make it highly unlikely that economic actors would be fully prepared to a “no-trade-deal” situation. Here we provide an economic shock simulation of the immediate aftermath of such a post-Brexit no-trade-deal scenario by computing the time evolution of more than 1.8 million interactions between more than 6,600 economic actors in the global trade network. We find an abrupt decline in the number of goods produced in the UK and the EU. This sudden output reduction is caused by drops in demand as customers on the respective other side of the Channel incorporate the new trade restriction into their decision-making. As a response, producers reduce prices in order to stimulate demand elsewhere. In the short term consumers benefit from lower prices but production value decreases with potentially severe socio-economic consequences in the longer term.
Economic losses from hurricanes cannot be nationally offset under unabated warming
Tropical cyclones range among the costliest of all meteorological events worldwide and planetary scale warming provides more energy and moisture to these storms. Modelling the national and global economic repercussions of 2017’s Hurricane Harvey, we find a qualitative change in the global economic response in an increasingly warmer world. While the United States were able to balance regional production failures by the original 2017 hurricane, this option becomes less viable under future warming. In our simulations of over 7000 regional economic sectors with more than 1.8 million supply chain connections, the US are not able to offset the losses by use of national efforts with intensifying hurricanes under unabated warming. At a certain warming level other countries have to step in to supply the necessary goods for production, which gives US economic sectors a competitive disadvantage. In the highly localized mining and quarrying sector—which here also comprises the oil and gas production industry—this disadvantage emerges already with the original Hurricane Harvey and intensifies under warming. Eventually, also other regions reach their limit of what they can offset. While we chose the example of a specific hurricane impacting a specific region, the mechanism is likely applicable to other climate-related events in other regions and other sectors. It is thus likely that the regional economic sectors that are best adapted to climate change gain significant advantage over their competitors under future warming.
More people too poor to move: divergent effects of climate change on global migration patterns
The observed temperature increase due to anthropogenic carbon emissions has impacted economies worldwide. National income levels in origin and destination countries influence international migration. Emigration is relatively low not only from high income countries but also from very poor regions, which is explained in current migration theory by credit constraints and lower average education levels, among other reasons. These relationships suggest a potential non-linear, indirect effect of climate change on migration through this indirect channel. Here we explore this effect through a counterfactual analysis using observational data and a simple model of migration. We show that a world without climate change would have seen less migration during the past 30 years, but that this effect is strongly reduced due to inhibited mobility. Our framework suggests that migration within the Global South has been strongly reduced because these countries have seen less economic growth than they would have experienced without climate change. Importantly, climate change has impacted international migration in the richer and poorer parts of the world very differently. In the future, climate change may keep increasing global migration as it slows down countries’ transition across the middle-income range associated with the highest emigration rates.