The mean damage costs of climate change will reach $5.4trn annually by 2070 and “spiral” to up to $31trn per year by 2200 if the global temperature rise hits 4.4C by the end of this century – which it will unless ‘business-as-usual’ is transformed. That is the damning conclusion of new research from CDP and University College London, entitled ‘Costing the Earth: Climate Damage Costs and GDP’. The report outlines how costs resulting from natural disaster remediation, mass climate-related migration, increased healthcare demands and shortages of key commodities – all resulting from the climate and nature crises- will impact global GDP in the coming decades. Also assessed are the costs of transitioning energy systems and adapting business operations to heat stress – particularly agriculture. A business-as-usual scenario of 4.4C of temperature increase since the industrial revolution is considered alongside the Paris Agreement’s less ambitious 2C trajectory.
In the business-as-usual scenario, global GDP growth will fall by 10% by 2050, against a 2018 baseline. The reduction in growth will be amplified to 25% by 2100. The impact of this trend will not be felt universally – developing nations in Asia, the Middle East and South America will see damages materialising more rapidly and intensely due to their climate risk exposure and reliance on fossil fuels. In the 2C scenario, however, global GDP growth rates will be maintained. The annual cost of dealing with climate-related damages in this scenario sits at $1.8trn in 2070 – just one-third of the estimate for a 4.4C scenario – and is likely to rise less sharply in the longer-term.
While acknowledging that adaptation and mitigation measures bear high price tags, the report outlines how the economic and non-economic costs of action will, in the 2C scenario, be a fraction of those associated with inaction. Developed nations like Canada and EU member states may see high bills for immediate action but this is largely because they have experienced good rates of GDP growth, the report explains.
CDP and UCL are using the findings to call on governments to better assess the long-term impacts of climate change on the economy as they develop their Covid-19 recovery plans.