The Benefits of Climate Change

September 2007
Volume 25 | Number 3

ECONOMIST, n. a scoundrel whose faulty vision sees things as they really are, not as they ought to be.—after Ambrose Bierce

By Daniel K. Benjamin

Many people believe that human-caused emissions of greenhouse gases will lead to higher temperatures and increased precipitation during the 21st century. Similarly, it is thought that these changes may have an impact on economic well-being. The question remains: If such changes occur, will their economic effects be positive or negative? A definitive answer to this question is likely to be a long time coming, but recent research has shed new light on one important aspect. Olivier Deschênes and Michael Greenstone (2007) show that the changes in temperatures and precipitation forecast by the standard models of climate change will actually benefit agriculture in America.

The authors take no position on whether existing models of global climate change are valid. Instead, they ask this question: Assuming that the models’ predicted increases in temperatures and precipitation occur, what are the consequences for American agriculture? They find that the lengthened growing seasons and added precipitation implied by the most widely cited global climate change models will modestly increase agricultural yields and thereby enhance the profitability of American agriculture.

Past research into the possible impact of climate change on agriculture has produced wildly varying results, with almost any set of consequences—positive or negative—seemingly possible. At one extreme, it has been estimated that climate change might reduce agricultural productivity so much as to cut the value of agricultural land by almost 20 percent. At the other extreme, the outcome might be increased productivity that pushes the value of agricultural land up by almost 30 percent.

Deschênes and Greenstone show that these widely differing numbers from past research are not the result of uncertainty about the climate and its effects on agriculture. Instead, they are the result of the statistical methods used by researchers. In particular, these methods turn out to be highly sensitive to small changes in the data samples, and to small changes in the way the data are used. To avoid this sensitivity, the authors employ a method in which the observed productivity impacts of past changes in temperatures and precipitation are used to infer the likely impacts of future changes in temperature and precipitation.

The most widely cited models of climate change predict that, over the remainder of the century, average temperatures will rise by about 50F and precipitation will eventually average about eight inches more per year. Using these predictions, combined with the effects of past swings in temperature and precipitation, the authors conclude that agricultural productivity in the United States is likely to rise slightly (about 4 percent) due to climate change, yielding modest positive economic benefits.

Perhaps most importantly, the authors find that, over any plausible range, the impacts of climate change are largely invariant to the size of the climate change. That is, if temperatures rise by more than 50F or precipitation increases by more than eight inches, productivity will rise even more—but not much more. Similarly, even if precipitation or temperatures fall over the next century, agricultural productivity will barely drop. In one sense, this is the powerful new finding to come out of this study: over a huge range of possible climate scenarios, agricultural productivity is largely unaffected. Given the widespread contention over the degree of likely future climate change and the extent to which it is human-caused, this is very good news. It suggests that agricultural productivity will be largely immune to the effects of climate change over the next century.

Climate change is obviously relevant far beyond American agriculture, so the present study is only one small piece of the puzzle we need to solve when thinking about environmental policy. Moreover, this study is surely not the last word on the likely effects of climate on agriculture. Nevertheless, its importance lies in two dimensions relevant for the broader debate over the human influence on the climate. First, it illustrates the importance of openly and critically reassessing what we think we know about the world. In the present instance it appears that the seeming uncertainty about the impact of climate change on agriculture has little to do with either agriculture or climate, and everything to do with human fallibility in studying their relationship.

The second key finding of the present study lies in its striking demonstration of the robustness of agriculture productivity to climate change. Even if precipitation and temperature change far more than any climate models now suggest they might, the likely effects on agricultural productivity in America appear to be de minimis. For those who have observed the resilience of Mother Nature and the adaptiveness of human beings, this may come as little surprise. But given the current state of climate research it surely comes as good news.

REFERENCE
Deschênes, Olivier, and Michael Greenstone. 2007. The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather. American Economic Review 97(2): 354–385.

Daniel K. Benjamin is a PERC senior fellow and Alumni Distinguished Professor at Clemson University. This column, “Tangents,” investigates policy implications of recent academic research. He can be reached at wahoo@clemson.edu.

 

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The effect of government policy changes on the private sector has been the unifying theme that ties together Daniel K. Benjamin's broad-scale research. He not only examines the outcomes of policy changes, but also the reasons behind the modifications.Taxes, unemployment, risk assessment, and drugs have been the focus of much of Benjamin's...
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