New economic study suggests global climate change damages are significantly higher than previously estimated

A new NBER study suggests global warming could slash world GDP by 30% per degree, potentially raising the social cost of carbon to over $1,200 per tonne.

By: AXL Media

Published: Mar 6, 2026, 10:33 AM EST

Source: The information in this article was sourced from Earth.Org

Challenging the Established Consensus

For several decades, the economic consensus has operated under the assumption that significant global warming would only reduce world income by a small percentage. Most integrated assessment models currently used to guide international climate policy suggest that a 1C rise in global temperature reduces global GDP by approximately 1% to 3%. These figures have historically justified carbon prices ranging between 100 and 200 dollars per tonne in advanced economies. However, a new working paper published by the National Bureau of Economic Research argues that these traditional models, which rely on local weather fluctuations to predict long term trends, may fundamentally understate the systemic risks posed by a warming planet.

Revised Projections for Global Wealth

Economists Adrien Bilal and Diego R. Känzig have presented findings suggesting that the macroeconomic damage from climate change is far more severe than previously understood. Their research indicates that a permanent 1C increase in global temperature could reduce world GDP per capita by more than 20% in the long run, with some estimates reaching 30%. The study shows that while global output initially falls by 2% to 3% following a temperature shock, the decline intensifies over time, peaking after five to six years. Under current policy trajectories, where temperatures could rise by 2C by the year 2100, the researchers warn that global GDP per capita could fall by more than 50% compared to a scenario without warming.

Global versus Local Temperature Metrics

The significant discrepancy between this new research and previous studies stems from the choice of temperature metrics. Earlier empirical studies focused on local, country level variations, such as how a specific hot year affects a single nation’s agricultural output. In contrast, Bilal and Känzig examined fluctuations in global mean temperature. They argue that climate change is a systemic transformation of the entire Earth system rather than a collection of isolated local anomalies. Their data suggests that global temperature is more strongly correlated with extreme climatic events—including droughts, heatwaves, and intense precipitation—than local shocks, with ocean warming identified as a primary driver of aggregate economic impact.