The impact of climate change on economic output across industries in Chile

Therefore our model predicts a large and positive impact of climate change on the total Chilean GDP if one uses all the model’s coefficients both in 2050 and 2100, a small impact of climate change in 2050 if the forecasts use just the statistically significant coefficients, and a moderately negative impact of climate change both in 2050 and 2100 if the forecasts apply just the negative and statistically significant coefficients. It is possible that the forecasts using all the model’s coefficients are way too optimistic, while the forecasts with just the negative and statis- tically significant coefficients can be too pessimistic since the coefficients are selected to clearly present a negative scenario. The appendix at the end of the article shows a counterfactual exer- cise with the most recent temperature projection paths of the IPCC (2021) [15], but the results are broadly similar, both qualitatively and quantitatively. Calibrated projections for Chile using industry coefficients estimated for the USA The counterfactual exercises considered in Tables 7–9 implemented the coefficients estimated from our model in Table 5. However, Chile only has 15 regions and many of those regions have a zero value for some industries or an extremely low value. The small number of Chilean regions and the low economic value of several of those regions makes it harder to estimate the economic impact of climate change in a reliable way. For this reason, we also implement a counterfactual exercise where the impact coefficient of the temperature increase induced by

climate change is obtained from a model estimated by Colacito, Hoffmann and Phan [13] for the 50 states and 12 industries of the USA. Since the USA’ states are relatively large economies and it includes a large number of states, then the impact of climate change on each industry can be estimated in a more precise way and with lower standard errors. The difference is that we are applying the value of each Chilean industry on GDP to make the projection for total GDP and this considers that Chile has higher shares of some industries such as Mining or Agriculture and lower shares of other industries. One small note is that we apply the same US coefficients for Agriculture-Fishing and Finance-Insurance-Real Estate to the separate Chilean industries of Agriculture and Fishing plus Financial services and Home property, since those industries are treated separately in the Chilean national accounts data. Table 10 shows the counterfactual exercise of applying the coefficients from Table A21 in Colacito, Hoffmann and Phan (2019) [13]. It shows its strongest impact in 2050 on Construc- tion, which would decline between 12.7% and 23.8%. Home property, Financial Services and Manufactures would also be strongly hit, declining between 9% and 19.5% relative to a sce- nario with no climate change. However, due to the positive coefficient estimated for the Min- ing industry, the impact of climate change on the Chilean GDP in 2050 would be limited to a decline of 0.8% or less. In 2100 the projections for climate change’s impact on total GDP

would again become very positive, because the counterfactual would assume that the log- growth of Mining would add up linearly over time. Table 11 shows a very similar counterfactual exercise with impact coefficients for tempera- ture estimated for the US, but it considers only the statistically significant coefficients from Table A21 in Colacito, Hoffmann and Phan (2019) [13]. The exercise also applies the Agricul- ture-Fishing and Manufacturing industries coefficients from Table A20 in Colacito, Hoff- mann and Phan (2019) [13], since those coefficients were estimated with a smaller standard- error, perhaps due to the higher importance of such industries for the US economy before 1997. The results show a negative impact of climate change for most industries, except for Mining, Energy-Gas-Water (EGA) and Transports-Communications. The strongest impact of climate change is now estimated to be for the Agriculture and Fishing sectors, followed by Construction, Financial services and Home property. In particular, Agriculture and Fishing PLOS ONE The impact of climate change on economic output across industries in Chile PLOS ONE | https://doi.org/10.1371/journal.pone.0266811 April 28, 2022 15 / 21