A new study has found that the economic damage of climate change is six times larger than previously expected.
According to the study, co-authored by Adrien Bilal and Diego R. Känzig, wealth will shrink as a result of global heating, at a pace compared with the level of financial losses inflicted by ongoing war.
Higher Estimates
In a new working paper, published by the National Bureau of Economic Research (NBER), researchers found that the world gross domestic product (GDP) declines by 12% with every 1C increase in global temperature. This estimate is far higher than previous ones.
Many climate scientists predict a 3C rise will happen by the end of this century, due to the ongoing use of fossil fuels, which will inflict a massive economic cost, according to the paper.
This scenario will cause “precipitous declines in output, capital and consumption that exceed 50% by 2100.” The paper adds that the magnitude of this economic loss is “comparable to the economic damage caused by fighting a war domestically and permanently.”
Economic Damage
Adrien Bilal, an economist at Harvard University, said: “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.”
He told the Guardian: “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 explained that purchasing power would already be 37% higher than its current level, without global heating seen in the past five decades. This loss could escalate further if climate crisis deepens, resembling economic stress experienced during wartime.
New Approach
According to Bilal, this new research analyzes the economic cost of climate change on a global scale, rather than on an individual country basis. This “holistic” approach recognized the interconnection between the impact of heatwaves, storms, floods and other damaging climate impacts that affect crop yields, diminish worker productivity and reduce capital investment.
The paper calculates a social cost of carbon, which is the cost of damage resulting from each additional ton of carbon emissions. This cost is estimated at $1,056 per ton.
In this regard, Gernot Wagner, a climate economist at Columbia University, praised the work done by Bilal and Diego R. Känzig, an economist at Northwestern University.
Wagner noted that their effort was significant. He said: “They have taken a step back and linking local impacts with global temperatures. 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.”
Massive Losses
The new paper found that the economic impact of the climate crisis will be almost uniform around the world, with lower-income countries starting at a lower point in wealth. This should prompt wealthy countries, such as the US, to reduce planet-heating emissions in its own economic interests.
However, climate change will bear a heavy economic cost, even with sharp emission cuts. The paper noted that even if global heating was limited to little higher than 1.5C, the GDP losses would still be around 15%.
“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,” Bilal said.
Last month, a separate study found that the global economic burden of climate change will reach about $38 trillion a year by 2049, reducing future global income by about 19% in the next 25 years.
Both papers show that the cost of climate change is much higher than the cost of transitioning away from fossil fuels and curbing climate change impacts. In this respect, Wagner said: “Unmitigated climate change is a lot more costly than doing something about it, that is clear.”
