EconomyMay 7, 2024

Economic Damage From Climate Change Could Dent Global Income by 19% Over 25 Years

Study also finds that the costs of climate change damage is significantly more than the cost to limit global warming.

Reported by Michael Katz

The economic damage caused by climate change may create a 19% dent in the global economy over the next 25 years, according to a study published in the scientific journal Nature. The report also said that the damage is already six times greater than the amount it will cost to limit global warming to 2 degrees Celicus per the Paris Climate Agreement.

On a regional basis, South Asia and Africa are going to be hit the hardest, according to the study, with a median income reduction of approximately 22% each by 2049, while Europe and North America would likely see income reductions of 11% each. The research was done by Maximilian Kotz, Anders Levermann and Leonie Wenz at the Potsdam Institute for Climate Impact Research in Germany.

“Losses are projected for all regions except those at very high latitudes, at which reductions in temperature variability bring benefits,” the report stated. “The largest losses are committed at lower latitudes in regions with lower cumulative historical emissions and lower present-day income.”

In forecasting the economic damages caused by climate change, the authors of the study used recent advances in climate econometrics, which they say provide evidence for impacts on economic growth from several components of the distribution of daily temperature and precipitation. It covers findings from more than 1,600 regions worldwide and uses climate and income data over the past 40 years to determine the plausible effects in several climate variables on economic productivity.

The study found that changing daily temperature variability, total annual precipitation, the annual number of wet days, and extreme daily rainfall has macroeconomic impacts in addition to those already identified from changing average temperature. It also said that a “middle-of-the road scenario of future income development” equates to annual damages in 2049 of $38 trillion worldwide.

“Projections of the macroeconomic damage caused by future climate change are crucial to informing public and policy debates about adaptation, mitigation and climate justice,” the report stated. “On the one hand, adaptation against climate impacts must be justified and planned on the basis of an understanding of their future magnitude … on the other hand, climate mitigation policy such as the Paris Climate Agreement is often evaluated by balancing the costs of its implementation against the benefits of avoiding projected physical damages.”

The report also said that “projections of future damages meet challenges when informing these debates, in particular the human biases relating to uncertainty and remoteness that are raised by long-term perspectives.” The authors say that they attempted to overcome those biases by assessing how much economic damage climate change has already caused.

“Such a focus on the near term limits the large uncertainties about diverging future emission trajectories,” the report stated. “The resulting long-term climate response and the validity of applying historically observed climate–economic relations over long timescales during which socio-technical conditions may change considerably.”