Globalization to amplify economic climate losses

Abstract:

Economic welfare under enhanced anthropogenic carbon emissions and associated future warming poses a major challenge for a society with an evolving globally connected economy. Unabated climate change will impact economic output for example through heat-stress-related reductions in productivity. Since meteorologically-induced production reductions can propagate along supply chains, structural changes in the economic network may influence climate-related losses. The role of the economic network evolution for climate impacts has been neither quantified nor qualitatively understood. Here we show that since the beginning of the 21^st century the structural change of the global supply network has been such that an increase of spillover losses due to unanticipated climatic events has to be expected. We quantify primary, secondary and higher-order losses from reduced labor productivity under past and present economic and climatic conditions and find that indirect losses are significant and increase with rising temperatures. The connectivity of the economic network has increased in such a way as to foster the propagation of production loss. This supply chain connectivity robustly exhibits the characteristic distribution of self-organized criticality which has been shifted towards higher values since 2001. Losses due to this structural evolution dominated over the effect of comparably weak climatic changes during this decade. Our finding suggests that the current form of globalization may amplify losses due to climatic extremes and thus necessitate structural adaptation that requires more foresight than presently prevalent.