Nonlinear El Niño impact on global economy in a warming climate

El Niño-Southern Oscillation (ENSO) is the most consequential climate phenomenon affecting global extreme weathers often with devastating socioeconomic impact. However, quantifying the impact on global economy has been a challenge and has so far focused on tangible loss such as reduced agriculture outputs and infrastructure damage. Elusive are issues to what extent the impact affects the macroeconomy, how long the impact lasts, and how the impact may change in a warming climate. Using a smooth nonlinear climate-economy model fitted with historical data, here we find a damaging impact from El Niño in which acceleration of impact lasts for three years after an initial shock, with a total effect an order of magnitude greater than previous estimates; impact from La Niña is not symmetric and far weaker. We attribute a loss of US$2.1T and US$4.0T in global economy to the 1997-98 and 2015-16 El Niño events, but a gain of only US$0.08T from the 1998-99 La Niña event. In a warming climate, economic loss grows exponentially with increased ENSO variability. Under a high-emission scenario, changes in ENSO variability cause an additional median loss of US$33T to global economy at a 3% discount rate aggregated over the last 80 years of the 21st century, but possibly as large as US$375T, highlighting an exacerbated economic damage from future ENSO under global warming. Further, the additional loss lessens with lower emissions and achieving the Paris Agreement reduces the additional loss by half, pointing to a strong incentive for mitigation.