Economic impacts of climate change

rdf:langString Economic impacts of climate change

rdf:langString December 2018

rdf:langString Most of the sources are from 2007 or before; field has progressed significantly since.

rdf:langString The economic impacts of climate change vary geographically and are difficult to forecast exactly. Researchers have warned that current economic, may seriously underestimate the effects of climate change, and point to the need for new models that give a more accurate picture of potential damages. Nevertheless, one 2018 study found that potential global economic gains if countries implement mitigation strategies to comply with the 2 °C target set at the Paris Agreement are in the vicinity of US$17 trillion per year up to 2100 compared to a very high emission scenario. Global losses reveal rapidly rising costs due to extreme weather events since the 1970s. Socio-economic factors have contributed to the observed trend of global losses, such as population growth and increased wealth. Part of the growth is also related to regional climatic factors, e.g., changes in precipitation and flooding events. It is difficult to quantify the relative impact of socio-economic factors and climate change on the observed trend. The trend does, however, suggest increasing vulnerability of social systems to climate change. A 2019 modelling study found that climate change had contributed towards global economic inequality. Wealthy countries in colder regions had either felt little overall economic impact from climate change, or possibly benefited, whereas poor hotter countries very likely grew less than if global warming had not occurred. Part of this observation stems from the fact that greenhouse gas emissions stem mainly from high-income countries while low-income countries are affected by it negatively. The total economic impacts from climate change are difficult to estimate, but increase for higher temperature changes. For instance, total damages are estimated to be 90% less if global warming is limited to 1.5 °C compared to 3.66 °C, a warming level chosen to represent no mitigation. One study found a 3.5% reduction in global GDP by the end of the century if warming is limited to 3 °C, excluding the potential effect of tipping points. Another study noted that global economic impact is underestimated by a factor of two to eight when tipping points are excluded from consideration. In the Oxford Economics high emission scenario, a temperature rise of 2 degrees by the year 2050 would reduce global GDP by 2.5% – 7.5%. By the year 2100 in this case, the temperature would rise by 4 degrees, which could reduce the global GDP by 30% in the worst case. Studies in 2019 suggest that economic damages due to climate change have been underestimated, and may be severe, with the probability of disastrous tail-risk events being nontrivial. Carbon-intensive industries and investors are expected to experience a significant increase in stranded assets with a potential ripple affect throughout the world economy.