Climate change will reduce future global income by about 19% over the next 25 years compared to a fictional world without warming, with the poorest regions and those least responsible for warming the atmosphere taking the biggest monetary hit, a new study has found.
The economic impact of climate change in terms of how much people earn is pegged at around $38 trillion a year by 2049, according to a study published Wednesday in the journal Nature by researchers at Germany’s Potsdam Institute for Climate Impact Research. By 2100, the financial cost could be double what previous studies estimated.
“Our analysis shows that climate change will cause major economic damage in almost all countries in the world over the next 25 years, as well as in highly developed countries such as Germany and the United States, with an 11% reduction in average income and France with a 13%,” the study said. co-authored by climate scientist and economist Leonie Wenz.
These damages are compared to a baseline without climate change and then applied against expected overall global growth in gross domestic product, said the study’s lead author, climate scientist Max Kotz. So while it may be 19% less globally than it would be without climate change, income in most places will still rise, but not by as much because of warmer temperatures.
For the past dozens of years, scientists and others have been focusing on the extreme weather conditions—heat waves, floods, droughts, storms—that have the greatest impact on climate. But when it comes to the financial hit, researchers found that “overall impacts are still driven by average warming and overall temperature increases,” Kotz said. This, he said, damaged crops and hindered labor production.
“These temperature increases will cause the most damage in the future because they are truly unprecedented compared to what we have experienced historically,” Kotz said. Last year, a record warm year, the global average temperature was 1.35 degrees Celsius (2.43 degrees Fahrenheit) warmer than pre-industrial times, according to the U.S. National Oceanic and Atmospheric Administration. The world has not had a month colder than the 20th century average since February 1979.
According to the research, southeastern and southwestern states in the United States are more economically squeezed than northern states, with some parts of Arizona and New Mexico taking the biggest monetary hit. In Europe, southern regions, including parts of Spain and Italy, are hit harder than places like Denmark or northern Germany.
Only regions adjacent to the Arctic (Canada, Russia, Norway, Finland and Sweden) benefited, Kotz said.
This also means that countries that have historically produced fewer greenhouse gas emissions per capita and have been least financially able to adapt to warming weather also suffer the greatest financial losses, Kotz said.
The research calculated that the world’s poorest countries would lose 61 percent more income than the richest countries.
“This is at the root of some of the injustices in the climate,” Kotz said.
This new study looked deeper than past research, examining 1,600 global areas smaller than countries, accounting for a variety of climate factors and examining how long climate economic shocks last, Kotz said. The study examined past economic impacts on the average global domestic product per capita and used computer simulations to look into the future to make detailed calculations.
The study shows that economic losses over the next 25 years are linked to emissions cuts that lead to only small changes in income reductions. But Kotz said the second half of this century, when two different possible futures were simulated, showed that reducing carbon emissions now actually works because of how heat-trapping gases accumulate.
If the world can stop carbon pollution and get down to a trend that limits warming to 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial times, the upper limit of the 2015 Paris Climate Agreement, then the financial hit will remain at 20% of global income, Kotz said. He said he had. But in the worst-case scenario, if emissions rise, the financial crisis would be closer to 60 percent, he said.
Kotz said this shows the public shouldn’t think this is a financial “doomsday” and nothing can be done.
Still, that’s worse than a 2015 study that predicted worst-case income would fall by around 25 percent by the end of the century.
Stanford University climate economist Marshall Burke, who wrote the 2015 study, said this new study’s finding that the economic damage ahead is steady and large “makes a lot of sense.”
Burke, who was not part of this study, said he had some issues with some of the technical calculations “so I don’t want to put too much weight on their specific numerical estimates, but I think the big picture is basically right.”
The University of California, Davis economist and environmental studies expert said the results were high compared to other recent studies, but they were “very large numbers” because climate change continues for a long time and economic damage from high temperatures continues to increase. Professor Frances Moore, who was not part of the research, said tackling climate change therefore clearly passed economists’ tests of costs and benefits.
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