Rapid temperature variability linked to slow economic growth

A new study from the Potsdam Institute for Climate Impact Research has revealed that erratic, unpredictable weather slows down the economy. Through more frequent day-to-day temperature variability, climate change may have major effects on economic growth.

The researchers analyzed daily temperature changes alongside economic data from more than 1,500 regions over 40 years. They found that when the daily temperature deviates from seasonal expectations, there are negative effects on the basic components of the economy, including human health, sales, crop yields, and operational costs.

“We have known for a while that changes in annual mean temperature impacts macroeconomic growth,” said study lead author Maximilian Kotz. “Yet now, for the first time, we’re also able to show that day-to-day variations in temperature, i.e. short-term variability, has a substantial impact. If this variability increases by one degree Celsius, economic growth is reduced on average by 5 percentage-points.”

According to study co-author Leonie Wenz, economies in low-income regions of the global South are particularly impacted. 

“We find that familiarity with temperature variations is important: Economies in Canada or Russia, where average monthly temperature varies by more than 40°C within a year, seem better prepared to cope with daily temperature fluctuations than low-latitude regions such as parts of Latin America or Southeast Asia, where seasonal temperature differences can be as small as 3°C. This is likely because farmers and small business owners have cultivated resilience against temperature variability,” said Wenz.

“Furthermore, income protects against losses. Even if at similar latitude, economies in poor regions are more strongly affected when daily temperature fluctuates than their counterparts in rich regions.”

The researchers looked at day-to-day temperature variability for each year between 1979 and 2018, comparing this information with the corresponding regional economic data. Overall, the team analyzed a total of 29,000 individual observations. 

“Rapid temperature variability is something completely different than long-term changes,” explained study co-author Anders Levermann. “The real problem caused by a changing climate are the unexpected impacts, because they are more difficult to adapt to.” 

“Farmers and other businesses around the world have started to adapt to climate change. But what if weather becomes simply more erratic and unpredictable? What we have shown is that erratic weather slows down the economy. Policy makers and industry need to take this into account when discussing the real cost of climate change.”

The study is published in the journal Nature Climate Change. 

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By Chrissy Sexton, Earth.com Staff Writer