The Macroeconomic Impact of Climate Change: Global Versus Local Temperature
Abstract
Abstract This article estimates that the macroeconomic damages from climate change are an order of magnitude larger than previously thought. Exploiting natural global temperature variability, we find that 1ºC warming reduces world GDP by over 20% in the long run. Global temperature correlates strongly with extreme climatic events, unlike country-level temperature used in previous work, explaining our larger estimate. We use this evidence to estimate damage functions in a neoclassical growth model. Business-as-usual warming implies a present welfare loss of more than 30%, and a social cost of carbon in excess of $1,200 per ton. These impacts suggest that unilateral decarbonization policy is cost-effective for large countries such as the United States.
Fields of Study & Subjects
Climate Change Policy and Economics
Sustainable Finance and Green Bonds
Climate change impacts on agriculture
Publication details
- Journal / source
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Volume
- 141
- Issue
- 2
- Pages
- 889–944
- Publication date
- 17 February 2026
- Language
- EN