The Economic Impact of Climate Change
The cost of doing nothing:
Failing to tackle climate could cost the world some $1.7 trillion a year by the middle of this decade, escalating to about $30 trillion a year by 2075, according to estimations by the 738 economists from around the world surveyed by New York University’s Institute for Policy Integrity.
The effects of climate change can be expected to shave 11 percent to 14 percent off global economic output by 2050 compared with growth levels without climate change, according to a report from Swiss Re, one of the world’s largest providers of insurance to other insurance companies. That amounts to as much as $23 trillion in reduced annual global economic output worldwide as a result of climate change. (NY Times April 2021).
Analysis by the Economist Intelligence Unit predicts that the GDP (Gross Domestic Product) of all nations will be negatively impacted by climate change but unfortunately, the economy of poorer nations will be more adversely affected, as shown below:
The EU’s ClimateCost project has estimated that if there is no new policy action, on average 345 000 people every year could be hit by coastal and river flooding in Europe by the 2050s as rising water breaches riverbanks and sea defences during stormy weather. This figure rises to over half a million people each year by the 2080s, with economic costs exceeding EUR 100 billion per year. If no new policy measures are adopted to combat global warming, the cost of climate change in Europe could reach almost 4 % of the gross domestic product (GDP) of the European Union by 2100.
The opportunity and benefits of investing in climate change mitigation:
An estimate from the World Bank finds that climate inaction could reduce global GDP by at least 5 percent annually while the price of the necessary action is set to 1 percent of global GDP annually. The world economy measured by global GDP is around $87 trillion a year meaning that a 1 % investment would be less than $900 billion.
The IMF estimates the implicit global subsidy of the fossil fuel industry worldwide from undercharging for energy and its environmental costs in 2017 was as much as $5.2 trillion, or 6.5% of global GDP. (Energy and Climate Research Unit, U.K)
One estimate found that for every $1 million invested in renewables infrastructure or energy efficiency generates 7.49 and 7.72 full-time jobs respectively. This compares with only 2.65 in fossil-fuel infrastructure.
Following a low-carbon path would increase life expectancy in Europe and reduce the economic costs of air pollution,’ said Watkiss. ‘The air quality benefits of this low-carbon path alone were estimated at savings of EUR 48 billion to EUR 99 billion per year by 2050.’
In 2020, the global green economy coming from the clean energy, energy efficiency, water, waste and pollution services was worth $4 trillion USD, equivalent to the fossil fuel sector. This represented 6% of the global stock market,. If the sustainable economy maintains its current trajectory and $90 trillion in green investment has been made by 2030, it could represent 10% of the global market value.
Currently, the U.S green economy employs 9.5 million full-time jobs (https://www.nature.com/articles/s41599-019-0329-3#auth-1) . By 2050 it is estimated that there will be 60 million new jobs in the green economy (EU Commission Dec 2020).