The latest global study warns that heat waves, severe floods, and wildfires amplified by climate change will have a significant financial impact. According to the new study published in Nature, the world economy could suffer a decline in global income of roughly 19% over the next 26 years.
According to the United Nations, even under current climate policies, warming could approach nearly 3 degrees Celsius over the next century – and certain groups of people may bear the primary financial burden, despite government efforts.
The authors of the Nature-published study note that short-term financial pain is almost inevitable, even if governments ramp up their actions now.
“These impacts are unavoidable in the sense that they do not differ across different future emission scenarios through 2049.”
– Maximilian Kotz and Leoni Wenz, researchers at the Potsdam Institute for Climate Impact Research
The Economic Hit and Adaptation
From an economic perspective, Noah Diffenbaugh of Stanford University emphasizes that the financial losses from climate change will take many forms: it is not only costly repairs to damaged infrastructure, but also effects on the agricultural sector, labor productivity, and even cognitive abilities in some cases.
Although much of the discussion of mitigation costs centers on expensive steps – restricting fossil fuel use or carbon capture technologies – the study argues that the short-term financial damage from climate change already exceeds the costs of addressing the crisis.
The authors estimate that the global economy will spend about $6 trillion by 2050 to implement the Paris Agreement, versus about $38 trillion in economic damages due to climate change.
“Adaptation may offer ways to reduce these losses,” note Kotz and Wenz.
Bernardo Bastien, a researcher at the Scripps Institution of Oceanography at the University of California, San Diego, argues that adaptive strategies that do not reduce the climate change itself but respond to its negative consequences can save money in the long run. He gave an example: California utility providers that shut down power grids to prevent wildfires.
“When you shut down power grids, you shut down industry and many households that rely on electricity for their livelihoods. It is very costly, but very necessary.”
– Bastien, researcher at the Scripps Institution of Oceanography at the University of California, San Diego
If some economic damages are expected by 2049, the authors argue that the benefits of mitigation will become noticeable later, after several decades.
“Damage estimates differ among emission scenarios after 2049, but economically this shows clear advantages of mitigation.”
– Nature study
However, the financial blow will not be distributed evenly. Noah Diffenbaugh stressed that, despite the general understanding of the aggregate impact of climate change, “these cumulative impacts involve extremely stark inequalities in who bears the brunt.”
According to Nature, regions may suffer different losses: North America and Europe are expected to see income declines of around 11% over the next 26 years, while South Asia and Africa around 22%.
The United States, traditionally one of the largest emitters, will incur a smaller economic hit compared with some neighboring countries, but the effects of global warming have also touched it – especially the younger generation in the country.
Another report, published in Consumer Reports based on ICF research, estimates that the long-term lifetime cost of raising a child born in the United States in 2024 could reach up to $500,000.
The ICF report notes that rising prices for basic needs driven by climate change will lead to an overall cost increase: housing could add about $125,000 to the lifetime cost of a child born in 2024, food about $33,000, and other expenses – such as energy, transportation, and health care – will also rise in the coming decades.
“For many Americans, these financial losses will require difficult decisions about funding food, housing, and other daily needs that climate change will increase by roughly 9 percent over their lifetimes,” concludes the ICF report.