Quantifying uncertainty about global and regional economic impacts of climate change

Abstract: The economic impacts of climate change are highly uncertain. Two of the most important uncertainties are the sensitivity of the climate system and the so-called damage functions, which relate climate change to economic damages and benefits. Despite broad awareness of these uncertainties, it is unclear which of them is most important, both on the global as well as the regional level. Here we apply different damage functions to data from climate models with vastly different climate sensitivities, and find that uncertainty in both climate sensitivity and economic damage per degree of warming are of similar importance for the global economic impact. Increasing the climate sensitivity or the sensitivity of the damage function both increases the economic damages globally. Yet, at the country-level the effect varies depending on the initial temperature as well as how much the country warms. Our findings emphasise the importance of including these uncertainties in estimates of future economic impacts, as they both are vital for the resulting impacts and thus policy implications.