This year's El Nino may be $3-trn setback for global economy by 2029

Damage from El Niño-related extreme weather, in crop losses, flooding, wildfires and civil unrest, can cost tens of billions of dollars in direct impacts over a period of months or a year. 

The paper, by Dartmouth Earth system scientists Christopher Callahan and Justin Mankin and published in the journal Science 

suggests that the real cost is much higher — in the trillions. 

Why it matters

A rapidly developing El Niño could result in a worldwide economic loss of upwards of $3 trillion through the end of the decade — costing some nations more than others.

The El Niño predicted for 2023 alone could result in more than $3 trillion of lost income by 2029.

How does climate variability affect economic growth?

El Niño provided them with a kind of natural experiment with which to probe it, a discrete period of change with a long tail that they could track through subsequent years of data. 

The new analysis uses a model that combines economic growth and climate variability from 1960 to 2019 and compares GDP growth around the world before and after El Niño events. The output suggests a “persistent” impact on countries’ economic growth. 

They found that a powerful episode in 1997 and 1998 set world GDP back $5.7 trillion and a 1982/1983 El Niño reduced growth by $4.1 trillion.  Consistent declines in growth after events, particularly in highly affected areas “suggests that there is a causal relationship between El Niño and depressions in economic growth,” Callahan said.

What they found

Looking back, the 1982-83 and 1997-98 El Niño events caused the US GDP to be roughly 3 per cent lower in 1988 and 2003 than it would have been otherwise. 

The researchers project that global economic losses for the 21st century will amount to $84 trillion as climate change potentially amplifies the frequency and strength of El Niño—even if current pledges by world leaders to reduce carbon emissions come to fruition.

The researchers estimate that the El Niño predicted for 2023 alone could hold the global economy back by as much as $3 trillion by 2029.

The authors said their findings carry several implications. One is new recognition of just how sensitive countries are to normal climate variability, even without considering global warming. 

Local extreme weather associated with El Niño aggregates “into a globally persistent macroeconomic effect, implying large and underestimated costs,” they write.