What is the economic cost of climate change?

What is the economic cost of climate change?

At the end of it all, everything boils downs to…money, doesn’t it?

You would have heard that climate change and global warming could possibly result in a whole lot of environmental, social and health problems. Even if these alarming statistics do not move our politicians, policy makers and businessmen, what will certainly make them sit up and take note is the economic loss that can result.

Because if something talks best in this world, it is money.

So, let us look at what kinds of economic impacts global warming and climate change can result in.

Some estimates suggest that the economic impact of global warming is currently costing the world more than $1.2 trillion a year, wiping 1.6% annually from global GDP.  Unmitigated, climate change could reduce global GDP by over 20% by 2100, say some estimates.

20% of global GDP – that sounds like a lot. Let’s figure out how much it could mean in absolute terms. It is of course damn difficult to predict what the global GDP will be in 2100, but some brave folks have gone ahead and said it could be in the range $250 trillion – $500 trillion. So, let’s take $300 trillion as the number. 20% of $300 trillion is $60 trillion, which is almost 80% of the 2017 global GDP of $75 trillion. Man, that’s a massive loss!

In the short term, the economic impacts will be acutely felt in developing countries, where damage to agricultural production from extreme weather linked to climate change is contributing to deaths from malnutrition, poverty and their associated diseases.

Other adverse economic effects from climate change could comprise:

• Unequal Economic Costs – By 2030, researchers estimate that the cost of climate change and air pollution combined will rise to 3.2% of global GDP, with the world’s least developed countries forecast to bear the brunt, suffering losses of up to 11% of their GDP. But major economies will also take a hit, could wipe 2% of the GDP of the US by 2030, while similar effects could cost China $1.2 trillion by the same date. It is not the absolute economic costs alone that will be affected. Climate change would also increase economic inequalities between and within countries.
• Across Industries – Almost every business and industry sector will be economically affected by climate change. While some seriously vulnerable sectors such as livestock, forestry, and fisheries could see severe economic impacts, other sectors critically sensitive to climate change include the energy, insurance, tourism and recreation industries.
• Africa – Select regions in Africa where coastal facilities are important for the economy, coasts and low-lying areas could see significantly adverse economic effects.
• Polar Regions – Interestingly, global warming could, in the short term provide some positive economic impacts for the polar regions. Why? Because such warming and melting of ice opens up new opportunities for trading and shipping across the Arctic ocean, lower operational costs for the oil and gas industry, lower heating costs, and easier access for ship-based tourism. But these short term positive impacts could be more than offset by the impact of climate change on infrastructure in the very same polar regions, and would significantly increase economic costs and negate all the benefits in the medium term.
• Small Islands – On small islands, tourism would, for the most part, be negatively affected by climate change. It may be noted that on many small islands, tourism is one of the biggest, if not THE biggest, contributor to GDP and employment.
• Economic Loss from Loss of Freshwater Resources – Predicted costs include the potential need for infrastructure investments to protect against floods and droughts.
• Economic Costs from Effects on Infrastructure – Roads, airport runways, railway lines and pipelines, (including oil pipelines, sewers, water mains etc.) may require increased maintenance and renewal as they become subject to greater temperature variation and are exposed to weather that they were not designed for.

While the above list is not comprehensive, it does, I hope it provides some idea of how global warming and climate change could finally start pinching all of us where it hurts most – our purses!