Climate crisis
Economic damage from climate change six
times worse than thought – report
A 1C increase in global temperature leads to a 12%
decline in world gross domestic product, researchers
have found
Oliver Milman
Fri 17 May 2024 10.00 EDT
The economic damage wrought by climate change is six times
worse than previously thought, with global heating set to shrink
wealth at a rate consistent with the level of financial losses of a
continuing permanent war, research has found.
A 1C increase in global temperature leads to a 12% decline in world
gross domestic product (GDP), the researchers found, a far higher
estimate than that of previous analyses. The world has already
warmed by more than 1C (1.8F) since pre-industrial times and many
climate scientists predict a 3C (5.4F) rise will occur by the end of
this century due to the ongoing burning of fossil fuels, a scenario
that the new working paper, yet to be peer-reviewed, states will
come with an enormous economic cost.
A 3C temperature increase will cause “precipitous declines in
output, capital and consumption that exceed 50% by 2100” the
paper states. This economic loss is so severe that it is “comparable
to the economic damage caused by fighting a war domestically and
permanently”, it adds.
“There will still be some economic growth happening but by the
end of the century people may well be 50% poorer than they
would’ve been if it wasn’t for climate change,” said Adrien Bilal, an
economist at Harvard who wrote the paper with Diego Känzig, an
economist at Northwestern University.
“I think everyone could imagine what they would do with an
income that is twice as large as it is now. It would change people’s
lives.”
Bilal said that purchasing power, which is how much people are
able to buy with their money, would already be 37% higher than it
is now without global heating seen over the past 50 years. This lost
wealth will spiral if the climate crisis deepens, comparable to the
sort of economic drain often seen during wartime.
“Let’s be clear that the comparison to war is only in terms of
consumption and GDP – all the suffering and death of war is the
important thing and isn’t included in this analysis,” Bilal said. “The
comparison may seem shocking, but in terms of pure GDP there is
an analogy there. It’s a worrying thought.”
The paper places a much higher estimate on economic losses than
previous research, calculating a social cost of carbon, which is the
cost in dollars of damage done per each additional ton of carbon
emissions, to be $1,056 per ton. This compares to a range set out by
the US Environmental Protection Agency (EPA) that estimates the
cost to be around $190 per ton.
Bilal said the new research takes a more “holistic” look at the
economic cost of climate change by analyzing it on a global scale,
rather than on an individual country basis. This approach, he said,
captured the interconnected nature of the impact of heatwaves,
storms, floods and other worsening climate impacts that damage
crop yields, reduce worker productivity and reduce capital
investment.
“They have taken a step back and linking local impacts with global
temperatures,” said Gernot Wagner, a climate economist at
Columbia University who wasn’t involved in the work and said it
was significant. “If the results hold up, and I have no reason to
believe they wouldn’t, they will make a massive difference in the
overall climate damage estimates.”
The paper found that the economic impact of the climate crisis will
be surprisingly uniform around the world, albeit with lower-
income countries starting at a lower point in wealth. This should
spur wealthy countries such as the US, the paper points out, to take
action on reducing planet-heating emissions in its own economic
interest.
Even with steep emissions cuts, however, climate change will bear
a heavy economic cost, the paper finds. Even if global heating was
restrained to little more than 1.5C (2.7F) by the end of the century, a
globally agreed-upon goal that now appears to have slipped from
reach, the GDP losses are still around 15%.
“That is still substantial,” said Bilal. “The economy may keep
growing but less than it would because of climate change. It will be
a slow-moving phenomenon, although the impacts will be felt
acutely when they hit.”
The paper follows separate research released last month that found
average incomes will fall by almost a fifth within the next 26 years
compared to what they would’ve been without the climate crisis.
Rising temperatures, heavier rainfall and more frequent and
intense extreme weather are projected to cause $38tn of
destruction each year by mid-century, according to the research.
Both papers make clear that the cost of transitioning away from
fossil fuels and curbing the impacts of climate change, while not
trivial, pale in comparison to the cost of climate change itself.
“Unmitigated climate change is a lot more costly than doing
something about it, that is clear,” said Wagner.
This article was amended on 17 May 2024 because an earlier
version misquoted Gernot Wagner in the last sentence.
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