Human activities have drastically altered the Earth's land surface, converting natural landscapes into cropland, grazing land, and urban areas. This land-use and land-cover change (LULCC) influences climate through biogeophysical (BGP) and biogeochemical (BGC) processes. BGP impacts, such as changes in albedo and evapotranspiration, vary spatially, unlike the uniform warming from greenhouse gases. BGC impacts primarily involve CO2 emissions, contributing significantly to anthropogenic warming. While previous research explored the economic consequences of climate change via altered annual mean temperature (AMT), the economic effects of LULCC, encompassing both BGP and BGC influences, remain poorly understood. This study aims to address this gap by quantifying the contrasting economic impacts of BGP and BGC effects of historical LULCC on global economic inequality, considering both changes in AMT and day-to-day temperature variability.

Existing studies have demonstrated that climate change affects economic development through various pathways, including agricultural yields, energy supply, labor productivity, and human health. Integrated assessment models, often used to evaluate economic impacts, parameterize climate-economy relationships. Empirical studies employing historical climate data and socioeconomic indicators reveal a nonlinear response of economic growth to AMT, with peak growth at an optimal temperature and decline at higher or lower temperatures. This nonlinear relationship suggests that historical anthropogenic warming disproportionately harms developing economies in warm climates while benefiting developed economies in colder regions, thus increasing global economic inequality. Conversely, the cooling effect of aerosols has been shown to potentially reduce this inequality. However, these previous studies primarily focused on AMT changes, neglecting the significant economic impact of day-to-day temperature variability, which is known to have a larger economic influence than AMT alone, particularly impacting low-latitude and low-income countries. Finally, while the unsustainable long-term impacts of LULCC on ecosystems have been noted, its economic impact through climate feedbacks remains unclear, especially considering both BGP and BGC effects and the role of temperature variability.

This research leverages multi-model climate simulations from the Coupled Model Intercomparison Project Phase 6 (CMIP6) to isolate the BGP and BGC impacts of historical LULCC (1850-2014) on surface air temperature (SAT). The Land-Use Harmonization 2 (LUH2) dataset provides the land-use forcing data. The BGP impact is assessed by comparing the "historical" simulation with a counterfactual "hist-noLu" simulation, where land use is fixed at 1850 levels. The BGC impact is estimated using the "1pctCO2" simulation, scaling the SAT response to accumulated LULCC-induced CO2 increases. The economic impacts are evaluated using a bootstrapped temperature-growth response function to assess the impact of changes in annual mean SAT, and a damage function to assess the effects of changes in day-to-day SAT variability. The study focuses on the period 1993-2012, using the ECMWF Reanalysis version 5 (ERA5) and MERRA2 for SAT data and World Bank data for socioeconomic indicators. The analysis uses a "delta" method to compare factual and counterfactual worlds with and without LULCC impacts, respectively. Global economic inequality is quantified using the 80:20 and 90:10 ratios of population-weighted GDP per capita. Seasonal impacts are examined using seasonal day-to-day variability and seasonal economic sensitivity functions. Sensitivity tests employ alternative SAT reanalysis data and temperature-growth response functions to validate the robustness of the findings.

The study reveals a significant reduction in primary vegetation (89.2%) and substantial increases in other land cover types (secondary vegetation, cropland, grazing land, and urban land) from 1850 to 2014. BGP impacts of deforestation lead to cooling in high latitudes due to increased albedo and warming in the tropics due to reduced evapotranspiration. BGC impacts, dominated by CO2 emissions, cause global warming. Overall, the combined BGC and BGP effects of LULCC lead to warming in most countries. This warming disproportionately harms developing countries in warm climates (e.g., India, Zambia, Saudi Arabia), but benefits developed countries in cooler climates (e.g., UK, Iceland). LULCC also enhances day-to-day SAT variability in developing countries and reduces it in developed countries. The combined effect of changes in annual mean SAT and day-to-day SAT variability induced by LULCC significantly increases global economic inequality, with the BGC warming effects largely driving this outcome. Specifically, the 80:20 and 90:10 ratios of global economic inequality are significantly increased by the combined effects of LULCC, even though global economic inequality has generally been mitigated over recent decades. Spring seasonal changes in day-to-day SAT variability play a particularly significant role in exacerbating this economic inequality.

The study's findings directly address the research question by demonstrating the significant and contrasting economic impacts of BGP and BGC aspects of historical LULCC. The BGC warming effect, largely outweighing the BGP cooling effect, increases global economic inequality. The results emphasize the importance of considering both AMT and day-to-day temperature variability when assessing the economic consequences of climate change. The findings highlight the often-overlooked economic ramifications of LULCC, showing that while short-term economic gains may arise from land conversion, the climate feedbacks can lead to significant long-term economic disparities. This has clear policy implications, suggesting the need for careful consideration of the long-term economic costs of unsustainable land-use practices. The study’s results are robust across different sensitivity tests.

This study reveals a significant contribution of historical LULCC to increasing global economic inequality through its impacts on temperature and temperature variability. The BGC warming effect dominates, exacerbating the economic disparity between developed and developing nations. This research underscores the need for comprehensive strategies to mitigate the climate impacts of LULCC and promote sustainable land management practices. Future research could focus on extending the analysis to longer time periods, incorporating other greenhouse gases, and evaluating regional economic impacts at finer spatial resolutions.

The study's findings are based on multi-model simulations, which involve inherent uncertainties. The analysis focuses on the country level, potentially masking regional-level disparities within countries. The study period (1993-2012) is relatively short due to data availability limitations; extending the analysis to a longer period could yield a larger magnitude of economic impacts. Additionally, the study primarily focuses on temperature changes, neglecting potential impacts from LULCC-induced changes in precipitation and other climate variables.