Climate crisis could dent global GDP by one-third this century, study finds

The climate crisis could knock more than one-third off the world’s potential gross domestic product (GDP) by the end of the century, a new report has claimed.

Researchers from several top global universities said the economic cost of carbon emissions could be about six times higher than previously thought because of the “persistent” effects of wildfires and other symptoms of global heating.

Experts from Cambridge University, Imperial College London and University College London contributed to the paper, plus others in Switzerland, Austria, Germany and the US.

Almost all previous estimates have assumed that climate-driven floods, droughts and wildfires do not dent economic growth in a persistent way, the authors said – but now there is “mounting evidence to the contrary”. They took into account the effects of year-to-year variations in climate, which had not been analysed in the past.

The researchers concluded the climate crisis’s impact may cut about 37 per cent from global GDP this century, equating to more than twice the drop seen in the Great Depression and compared to only 6 per cent if lasting economic harm from warming was discounted.

They further suggested that the figures used by governments to calculate their carbon policies could be far too low. For example, the US estimates the social cost of a tonne of CO2 at $51 (£37), while more recent science and updated models now show it could be more than $3,000.

The so-called social cost of carbon emissions for the “global south” has also been greatly underestimated, experts added. The persistence of economic damage in the new model suppressed growth in Africa, south Asia and Latin America but modelled growth was boosted in eastern Europe, the European Union area and northern Asia, which are cooler.

A warming climate makes devastating floods and wildfires like those seen already this year more likely, said Dr Chris Brierley from University College London, adding that their impact on growth was “unlikely to be zero” even if it could not yet be pinned down exactly.

“If we stop assuming that economies recover from such events within months, the costs of warming look much higher than usually stated,” Dr Brierley added. “We still need a better understanding of how climate alters economic growth, but even in the presence of small long-term effects, cutting emissions becomes much more urgent.”

Even minor shifts from the assumption that climate shocks do not affect GDP growth have “major economic implications and eclipse most other modelling decisions”, Dr Brierley and his colleagues wrote in the paper.

Countries will have to bolster their ability to adapt to the climate crisis in order to mitigate persistent economic damage, they concluded. Governments’ efforts to protect their economies through cutting emissions will also be a factor, said Jarmo Kikstra at the International Institute for Applied Systems Analysis and Imperial College London.

On the newly analysed effects of year-to-year variance in Earth’s climate, Dr James Rising, at the University of Delaware and London School of Economics and Political Science, added: “While climate variability does not change the long-term best estimate of climate change impacts by all that much, it increases the range of risks, and those events can have long-lasting effects.”

The research is published in Environmental Research Letters.

It comes ahead of the UN’s Cop26 climate summit which is being held in Glasgow in November, and hot on the heels of a report from the Intergovernmental Panel on Climate Change which warned the chance of limiting warming to either 1.5C or 2C was “slipping away”.