A new study from the Potsdam Institute for Climate Impact Research, published in the journal Nature, warns that the global economy could face annual losses of $38 trillion by 2049 due to climate change.
This staggering financial toll results from the impacts of extreme weather on agriculture, labour productivity, and infrastructure.
Lead researcher Leonie Wenz from the Potsdam Institute explained that global income could decrease by 19% by mid-century compared to a scenario without climate change.
The study analyzed data from over 1,600 regions worldwide over the past 40 years to assess the future impacts of rising global temperatures on economic growth.
“Climate change will cause enormous economic damage over the next 25 years in nearly all countries,” Wenz stated. “Significant and immediate reductions in our emissions are essential; otherwise, economic losses will worsen in the second half of the century, potentially reaching an average of 60% globally by 2100.”
Human-induced greenhouse gas emissions have already increased the Earth’s average temperature by approximately 1.1 degrees Celsius since pre-industrial times, leading to costly extreme weather phenomena.
Over the past 30 years, such events have resulted in around $7 trillion in damages, according to Bloomberg Intelligence.
Since 2016, climate-related damages have averaged $500 billion annually, equating to 2% of the U.S. GDP, with developing countries bearing the brunt of the losses despite contributing less to the phenomenon.
Researchers suggest that limiting global warming to two degrees Celsius by the end of the century would be the most cost-effective way to mitigate additional climate damage.
Wenz added, “Protecting our climate is far less costly than not doing so, even without considering non-economic impacts like loss of life or biodiversity. More adaptation efforts will be necessary to avoid at least some of these impacts.”
The study predicts that countries least responsible for climate change will suffer income losses 60% greater than high-income countries and 40% more than the highest emitting nations, often having fewer resources to adapt to current effects.
Even developed nations like Germany, France, and the US will feel economic impacts, though only polar regions might benefit from rising temperatures.
The severity of the economic damage surpasses previous estimates because it takes into account not only temperature increases but also additional climate variables like heavy rainfall and the effects of extreme weather on agriculture, labour productivity, and human health.
Co-author Anders Levermann emphasized the necessity of transitioning to renewable energy systems for our security and economic benefit.
“Staying on our current path will lead to catastrophic outcomes,” Levermann warned, highlighting the urgent need for structural changes in energy systems.
