New research uncovers the global economic cost of climate change, with income reductions and damages driving up the bill.
The report from the Potsdam Institute for Climate Impact Research (PIK) indicates that even the scenario of CO2 emissions being drastically cut from today, the world economy is already committed to a 19 per cent income reduction until 2050 as a result of climate change. In total, these costs are “six times larger than the mitigation costs needed to limit global warming to two degrees,” the report states.
The empirical data used to inform this study was collected from over 1,600 regions worldwide over the last 40 years and highlights the future impacts of climate change on economic growth and prosperity.
Firstly, the research suggests high and far-reaching levels of income reduction because of climate change. South Asia and Africa are the most heavily impacted by this climate related income reductions forecast at upwards of 25 per cent. The cause of these income reductions can be attributed to climate change negatively impacting agriculture and labour productivity for infrastructure due to adverse weather conditions and global temperature rises shifting crop yields, for example. Areas of the globe reliant on these types of labour will be impacted significantly.
Global damages are estimated to sit around 38 trillion dollars annually, with a range of 19 – 59 trillion dollars until 2050. Extreme weather conditions are a key contributor to these costs as rising global temperatures influence rainfall, storms and wildfires which have profound impacts on the communities that face them.
“Our study highlights the considerable inequity of climate impacts,” says Anders Levermann, Head of Research Department Complexity Science at PIK. “We find damages almost everywhere, but countries in the tropics will suffer the most because they are already warmer. The countries least responsible for climate change, are predicted to suffer income loss that is 60% greater than the higher-income countries and 40% greater than higher-emission countries. They are also the ones with the least resources to adapt to its impacts.”
The small amount pledged to the Loss & Damage fund so far demonstrates that the wealthiest nations are struggling to comprehend the scale of immediate impact on many countries, particularly across the equator. This type of rhetoric can also be seen in businesses here in the UK. Understanding the full scale of your carbon emissions and the broader impact they are having can help SMEs gain perspective and think more tactfully about their carbon reduction strategies.
Negative climate impacts don’t need to occur at your front door to be relevant. Global climate disasters mean tougher trade conditions, poorer availability of resources, and far greater supply chain vulnerability. Loss & Damage implies the loss has already occurred. The solution should be a collaborative effort to avoid this loss entirely.
Ben Williamson, Green Technologies & Services Consultant
21 November 2024
19 November 2024
