Economics of action are compelling: it’s far cheaper to prevent climate change than to keep causing it

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Fig. 1: The commitment and divergence of economic climate damages versus mitigation costs. Estimates of the projected reduction in income per capita from changes in all climate variables based on empirical models of climate impacts on economic output with a robust lower bound on their persistence (Extended Data Fig. 1) under a low-emission scenario compatible with the 2 °C warming target and a high-emission scenario (SSP2-RCP2.6 and SSP5-RCP8.5, respectively) are shown in purple and orange, respectively. Shading represents the 34% and 10% confidence intervals reflecting the likely and very likely ranges, respectively (following the likelihood classification adopted by the IPCC), having estimated uncertainty from a Monte Carlo procedure, which samples the uncertainty from the choice of physical climate models, empirical models with different numbers of lags and bootstrapped estimates of the regression parameters shown in Supplementary Figs. 1–3. Vertical dashed lines show the time at which the climate damages of the two emission scenarios diverge at the 5% and 1% significance levels based on the distribution of differences between emission scenarios arising from the uncertainty sampling discussed above. Note that uncertainty in the difference of the two scenarios is smaller than the combined uncertainty of the two respective scenarios because samples of the uncertainty (climate model and empirical model choice, as well as model parameter bootstrap) are consistent across the two emission scenarios, hence the divergence of damages occurs while the uncertainty bounds of the two separate damage scenarios still overlap. Estimates of global mitigation costs from the three IAMs that provide results for the SSP2 baseline and SSP2-RCP2.6 scenario are shown in light green in the top panel, with the median of these estimates shown in bold.

38 trillion dollars in damages each year: World economy already committed to income reduction of 19 % due to climate change

Date:
April 17, 2024
Source:
Potsdam Institute for Climate Impact Research (PIK)
Summary:
Even if CO2 emissions were to be drastically cut down starting today, the world economy is already committed to an income reduction of 19% until 2050 due to climate change, a new study finds. These damages are six times larger than the mitigation costs needed to limit global warming to two degrees. Based on empirical data from more than 1,600 regions worldwide over the past 40 years, scientists assessed future impacts of changing climatic conditions on economic growth and their persistence.
FULL STORY

Even if CO2 emissions were to be drastically cut down starting today, the world economy is already committed to an income reduction of 19 % until 2050 due to climate change, a new study published in Nature finds. These damages are six times larger than the mitigation costs needed to limit global warming to two degrees. Based on empirical data from more than 1,600 regions worldwide over the past 40 years, scientists at the Potsdam Institute for Climate Impact Research (PIK) assessed future impacts of changing climatic conditions on economic growth and their persistence.

“Strong income reductions are projected for the majority of regions, including North America and Europe, with South Asia and Africa being most strongly affected. These are caused by the impact of climate change on various aspects that are relevant for economic growth such as agricultural yields, labour productivity or infrastructure,” says PIK scientist and first author of the study Maximilian Kotz. Overall, global annual damages are estimated to be at 38 trillion dollars, with a likely range of 19-59 trillion dollars in 2050. These damages mainly result from rising temperatures but also from changes in rainfall and temperature variability. Accounting for other weather extremes such as storms or wildfires could further raise them.

Huge economic costs also for the United States and European Union“Our analysis shows that climate change will cause massive economic damages within the next 25 years in almost all countries around the world, also in highly-developed ones such as Germany, France and the United States,” says PIK scientist Leonie Wenz who led the study. “These near-term damages are a result of our past emissions. We will need more adaptation efforts if we want to avoid at least some of them. And we have to cut down our emissions drastically and immediately — if not, economic losses will become even bigger in the second half of the century, amounting to up to 60% on global average by 2100. This clearly shows that protecting our climate is much cheaper than not doing so, and that is without even considering non-economic impacts such as loss of life or biodiversity.”

To date, global projections of economic damages caused by climate change typically focus on national impacts from average annual temperatures over long-time horizons. By including the latest empirical findings from climate impacts on economic growth in more than 1,600 subnational regions worldwide over the past 40 years and by focusing on the next 26 years, the researchers were able to project sub-national damages from temperature and rainfall changes in great detail across time and space all the while reducing the large uncertainties associated with long-term projections. The scientists combined empirical models with state-of-the-art climate simulations (CMIP-6). Importantly, they also assessed how persistently climate impacts have affected the economy in the past and took this into account as well.

Countries least responsible will suffer most

“Our study highlights the considerable inequity of climate impacts: We find damages almost everywhere, but countries in the tropics will suffer the most because they are already warmer. Further temperature increases will therefore be most harmful there. The countries least responsible for climate change, are predicted to suffer income loss that is 60% greater than the higher-income countries and 40% greater than higher-emission countries. They are also the ones with the least resources to adapt to its impacts. It is on us to decide: structural change towards a renewable energy system is needed for our security and will save us money. Staying on the path we are currently on, will lead to catastrophic consequences. The temperature of the planet can only be stabilized if we stop burning oil, gas and coal,” says Anders Levermann, Head of Research Department Complexity Science at the Potsdam Institute and co-author of the study.

Story Source:

Materials provided by Potsdam Institute for Climate Impact Research (PIK). Note: Content may be edited for style and length.

BY SETH BORENSTEIN
Updated 1:00 AM AEST, April 18, 2024 AP news

In the United States, the southeastern and southwestern states get economically pinched more than the northern ones with parts of Arizona and New Mexico taking the biggest monetary hit, according to the study. In Europe, southern regions, including parts of Spain and Italy, get hit harder than places like Denmark or northern Germany.

Only Arctic adjacent areas — Canada, Russia, Norway, Finland and Sweden — benefit, Kotz said.

It also means countries which have historically produced fewer greenhouse gas emissions per person and are least able to financially adapt to warming weather are getting the biggest financial harms too, Kotz said.

The world’s poorest countries will suffer 61% bigger income loss than the richest ones, the study calculated.

“It underlies some of the injustice elements of climate,” Kotz said.

This new study looked deeper than past research, examining 1,600 global areas that are smaller than countries, took several climate factors into account and examined how long climate economic shocks last, Kotz said. The study examined past economic impacts on average global domestic product per person and uses computer simulations to look into the future to come up with their detailed calculations.

The study shows that the economic harms over the next 25 years are locked in with emission cuts producing only small changes in the income reduction. But in the second half of this century that’s when two different possible futures are simulated, showing that cutting carbon emissions now really pays off because of how the heat-trapping gases accumulate, Kotz said.

If the world could curb carbon pollution and get down to a trend that limits warming to 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial times, which is the upper limit of the 2015 Paris climate agreement, then the financial hit will stay around 20% in global income, Kotz said. But if emissions increase in a worst case scenario, the financial wallop will be closer to 60%, he said.

Still, it’s worse than a 2015 study that predicted a worst case income hit of about 25% by the end of the century.

Marshall Burke, the Stanford University climate economist who wrote the 2015 study,said this new research’s finding that the economic damage ahead is locked in and large “makes a lot of sense.”

Burke, who wasn’t part of this study, said he has some issues with some of the technical calculations “so I wouldn’t put a ton of weight on their specific numerical estimates, but I think the big picture is basically right.”

The conclusions are on the high end compared to other recent studies, but since climate change goes for a long time and economic damage from higher temperatures keep compounding, they “add up to very large numbers,” said University of California Davis economist and environmental studies professor Frances Moore, who wasn’t part of the study. That’s why fighting climate change clearly passes economists’ tests of costs versus benefits, she said.

 

Journal Reference:

    1. Maximilian Kotz, Anders Levermann, Leonie Wenz. The economic commitment of climate change. Nature, 2024; 628 (8008): 551 DOI: 10.1038/s41586-024-07219-0</
      Article
    1. Open access
    2. Published:

The economic commitment of climate change

Nature volume 628, pages 551–557 (2024)Cite this article

Metrics details

Abstract

Global projections of macroeconomic climate-change damages typically consider impacts from average annual and national temperatures over long time horizons1,2,3,4,5,6. Here we use recent empirical findings from more than 1,600 regions worldwide over the past 40 years to project sub-national damages from temperature and precipitation, including daily variability and extremes7,8. Using an empirical approach that provides a robust lower bound on the persistence of impacts on economic growth, we find that the world economy is committed to an income reduction of 19% within the next 26 years independent of future emission choices (relative to a baseline without climate impacts, likely range of 11–29% accounting for physical climate and empirical uncertainty). These damages already outweigh the mitigation costs required to limit global warming to 2 °C by sixfold over this near-term time frame and thereafter diverge strongly dependent on emission choices. Committed damages arise predominantly through changes in average temperature, but accounting for further climatic components raises estimates by approximately 50% and leads to stronger regional heterogeneity. Committed losses are projected for all regions except those at very high latitudes, at which reductions in temperature variability bring benefits. The largest losses are committed at lower latitudes in regions with lower cumulative historical emissions and lower present-day income.

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