A key statistic describing climate change impacts is the ‘social cost of carbon dioxide’ (SCCO₂), the projected cost to society of releasing an additional tonne of CO₂. Cost-benefit integrated assessment models that estimate the SCCO₂ lack robust representations of climate feedbacks, economy feedbacks, and climate extremes. We compare the PAGE-ICE model with the decade older PAGE09 and find that PAGE-ICE yields SCCO₂ values about two times higher, because of its climate and economic updates. Climate feedbacks only account for a relatively minor increase compared to other updates. Extending PAGE-ICE with economy feedbacks demonstrates a manifold increase in the SCCO₂ resulting from an empirically derived estimate of partially persistent economic damages. Both the economy feedbacks and other increases since PAGE09 are almost entirely due to higher damages in the Global South. Including an estimate of interannual temperature variability increases the width of the SCCO₂ distribution, with particularly strong effects in the tails and a slight increase in the mean SCCO₂. Our results highlight the large impacts of climate change if future adaptation does not exceed historical trends. Robust quantification of climate-economy feedbacks and climate extremes are demonstrated to be essential for estimating the SCCO₂ and its uncertainty.

Arctic feedbacks accelerate climate change through carbon releases from thawing permafrost and higher solar absorption from reductions in the surface albedo, following loss of sea ice and land snow. Here, we include dynamic emulators of complex physical models in the integrated assessment model PAGE-ICE to explore nonlinear transitions in the Arctic feedbacks and their subsequent impacts on the global climate and economy under the Paris Agreement scenarios. The permafrost feedback is increasingly positive in warmer climates, while the albedo feedback weakens as the ice and snow melt. Combined, these two factors lead to significant increases in the mean discounted economic effect of climate change: +4.0% ($24.8 trillion) under the 1.5 °C scenario, +5.5% ($33.8 trillion) under the 2 °C scenario, and +4.8% ($66.9 trillion) under mitigation levels consistent with the current national pledges. Considering the nonlinear Arctic feedbacks makes the 1.5 °C target marginally more economically attractive than the 2 °C target, although both are statistically equivalent.

The extensive melting of Arctic sea ice driven by climate change provides opportunities for commercial shipping due to shorter travel distances of up to 40% between Asia and Europe. It has been estimated that around 5% of the world’s trade could be shipped through the Northern Sea Route (NSR) in the Arctic alone under year-round and unhampered navigability, generating additional income for many European and East Asian countries. Our analysis shows that for Arctic sea ice conditions under the RCP8.5 emissions scenario and business restrictions facing shipping companies, NSR traffic will increase steadily from the mid-2030s onwards, although it will take over a century to reach the full capacity expected for ice-free conditions. However, in order to achieve a balanced view of Arctic shipping, it is important to include its detrimental environmental impacts, most notably emissions of short-lived pollutants such as black carbon, as well as CO₂ and non-CO₂ emissions associated with the additional economic growth enabled by NSR. The total climate feedback of NSR could contribute 0.05% (0.04%) to global mean temperature rise by 2100 under RCP8.5 (RCP4.5), adding $2.15 trillion ($0.44 trillion) to the NPV of total impacts of climate change over the period until 2200 for the SSP2 socio-economic scenario. The climatic losses offset 33% (24.7%) of the total economic gains from NSR under RCP8.5 (RCP4.5), with the biggest losses set to occur in Africa and India. These findings call for policy instruments aimed at reducing emissions from Arctic shipping and providing compensation to the affected regions.

The scientific literature on physical changes in the Arctic region driven by climate change is extensive. In addition, the emerging understanding of physical feedbacks and teleconnections between the Arctic and the rest of the world suggests that the warming in the Arctic region is likely to cause impacts that extend well beyond the region itself. However, there is only limited research on how Arctic change may affect economies and individual industry sectors around the world. We argue that there is a pressing need for more research on this topic and present a conceptual framework to guide future research for assessing the regional and global economic impacts of Arctic change, including both possible benefits and costs. We stress on the importance of a transdisciplinary approach, which includes an integration of the natural sciences, economics and social sciences, as well as engagement with a wide range of stakeholders to better understand and manage the implications of Arctic change.

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