Nonlinear El Niño impacts on the global economy under climate change
October 07,2023

Yi Liu, Wenju Cai, Xiaopei Lin, Ziguang Li & Ying Zhang

Published in Nature Communications, September 2023

The El Niño-Southern Oscillation (ENSO) is a consequential climate phenomenon affecting global extreme weather events often with largescale socioeconomic impacts. To what extent the impact affects the macroeconomy, how long the impact lasts, and how the impact may change in a warming climate are important questions for the field. Using a smooth nonlinear climate-economy model fitted with historical data, here we find a damaging impact from an El Niño which increases for a further three years after initial shock, amounting to multi-trillion US dollars in economic loss; we attribute a loss of US$2.1 T and US$3.9 T globally to the 1997-98 and 2015-16 extreme El Niño events, far greater than that based on tangible losses. We find impacts from La Niña are asymmetric and weaker, and estimate a gain of only US$0.06 T from the 1998-99 extreme La Niña event. Under climate change, economic loss grows exponentially with increased ENSO variability. Under a high-emission scenario, increased ENSO variability causes an additional median loss of US$33 T to the global economy at a 3% discount rate aggregated over the remainder of the 21st century. Thus, exacerbated economic damage from changing ENSO in a warming climate should be considered in assessments of mitigation strategies.

Liu, Y., Cai, W., Lin, X. et al. Nonlinear El Niño impacts on the global economy under climate change. Nat Commun 14, 5887 (2023).

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