Quantifying the economic impact of changes in energy demand for space heating and cooling systems under varying climatic scenarios

Abstract

The building sector is highly sensitive to climate change, where energy is used for numerous purposes such as heating, cooling, cooking and lighting. Space heating and cooling account for a large proportion of overall energy use, and the associated energy demand is also affected by climate change. Here, we project the economic impact of changes in energy demand for space heating and cooling under multiple climatic conditions. We use an economic model coupled with an end-use technology model to explicitly represent the investment costs for air-conditioning technologies, which influence the macroeconomy. We conclude that the negative effects on the economy from increases in the use of space cooling are sufficiently large to neutralize the positive impacts from reductions in space heating usage under climate change, which results in significant economic loss. The economic loss under the highest emissions scenario (RCP8.5) would correspond to a −0.34% (−0.39% to −0.18%) change in global gross domestic product (GDP) in 2100 compared with GDP without any climate change, while the impact under the lowest emissions scenario (RCP2.6) would result in a −0.03% (−0.07% to −0.01%) change in global GDP in 2100. The economic losses are mainly generated by incremental technological costs and not by changes in energy demand itself. The amount of economic loss can vary substantially based on assumptions of technological costs, population and income. To reduce the negative impacts of climate change measures for reducing the costs of air conditioning will be an important consideration for the building sector in the future.