Even with a significant reduction in CO2 emissions starting now, a recent study suggests that the world economy will still suffer a 19% income reduction by 2050 due to climate change. This impact is six times larger than the costs needed to limit global warming to two degrees. Using data from over 1,600 regions around the world over the past 40 years, researchers evaluated the future effects of changing climate conditions on economic growth and their long-term consequences.likely to be affected,” said lead author Leonie Wenz. “One reason for this is the projected increase in extreme weather events such as storms and droughts. If the current trend of climate change continues, we can expect to see significant economic consequences.”
Climate Change Economic Impact: $38 Trillion in Damages & 19% Income Reduction
The impact of climate change has a significant effect on economic growth, particularly in areas such as agricultural yields, labor productivity, and infrastructure, according to Maximilian Kotz, a scientist at PIK and the study’s lead author. The estimated global annual damages are projected to reach $38 trillion by 2050, with a potential range of $19-59 trillion. These damages are primarily due to increasing temperatures, as well as changes in rainfall and temperature variability. Additional weather extremes like storms or wildfires could further contribute to these economic costs.The study led by PIK scientist Leonie Wenz has revealed that climate change will lead to significant economic damages in the next 25 years across almost all countries, including highly-developed ones such as Germany, France, and the United States. These near-term damages are a consequence of previous emissions, and more adaptation efforts will be necessary to mitigate at least some of them. It is crucial to drastically and immediately reduce emissions to prevent even larger economic losses in the latter half of the century, which could amount to up to 60% on a global average.
The study projects that failure to protect the climate could cost the global economy $600 trillion by the year 2100. This highlights the cost-effectiveness of climate protection measures compared to the potential economic and non-economic impacts of inaction.
Current global economic damage projections for climate change primarily consider national impacts based on average annual temperatures over long periods. This study, however, incorporates recent empirical data on climate impact on economic growth in over 1,600 subnational regions worldwide over the past 40 years. By focusing on the next 26 years, the researchers were able to forecast sub-national damages from changes in temperature and rainfall.
The study delves into the intricacies of climate impacts over time and space, minimizing the large uncertainties associated with long-term projections. The scientists utilized empirical models along with cutting-edge climate simulations (CMIP-6). Additionally, they evaluated the persistent effects of climate impacts on the economy in the past and incorporated this aspect into their analysis.
Disproportionate impact on least responsible countries
“Our research underscores the significant inequality of climate impacts: Damages are evident almost everywhere, but countries located in the tropics will bear the brunt of the impact due to their pre-existing warmer climates. With further temperature rises…The countries that are least responsible for climate change are expected to experience a 60% greater income loss than higher-income countries and 40% greater than higher-emission countries. These countries also have the least resources to adapt to the impacts of climate change. It is up to us to make a decision: we need structural change towards a renewable energy system for our security and to save money. Continuing on our current path will result in catastrophic consequences. According to Anders Levermann, Head of Research Department, the planet’s temperature can only be stabilized if we stop burning oil, gas, and coal.The study was co-authored by Maximilian Kotz, Anders Levermann, and Leonie Wenz of the Potsdam Institute for Climate Impact Research. The reference for the study is: Maximilian Kotz, Anders Levermann, Leonie Wenz. “The economic commitment of climate change.” Nature, 2024; 628 (8008): 551 DOI: 10.1038/s41586-024-07219-0