Climate Change Could Slash Global GDP by 25% by 2100, New Study Warns
A recent study published in PLOS Climate has unveiled alarming projections regarding the economic impact of climate change, suggesting that nearly a quarter of the world’s per capita gross domestic product (GDP) could be lost by the end of the century if current trends continue. This research, conducted by teams from the University of Cambridge’s climaTRACES Lab and the International Monetary Fund (IMF), challenges long-standing beliefs about which nations are most vulnerable to climate-related economic disruptions.
The Economic Toll of Climate Change
The study highlights that the past warming of approximately 1.2°C has already resulted in an estimated 2% loss in global income, translating to about $1.6 trillion between 1960 and 2014. This figure aligns closely with findings from the University of Delaware, which estimated historical GDP losses from warming at around 1.8%, or approximately $1.5 trillion.
The researchers, led by co-authors Mohaddes and Raissi, analyzed temperature impact projections for 174 countries from 2015 to 2100. They utilized data from the Intergovernmental Panel on Climate Change (IPCC), which accounts for varying rates of temperature increase, climate variability, and adaptation efforts. Their analysis compared future projections against two baselines: one mimicking temperature trends from 1960 to 2014 and another representing a hypothetical scenario of “no further warming.”
Dire Projections for Global Income
Under the most pessimistic scenario, characterized by high emissions and minimal adaptation efforts, global per capita income losses could reach between 20% and 24% by 2100 compared to the “no further warming” baseline. This stark forecast underscores the urgent need for global action to mitigate climate change.
India, in particular, faces severe economic repercussions. The study estimates that GDP per capita losses could reach 2.13% by 2025, escalating to over 25% by the century’s end under worst-case assumptions. However, the researchers note that faster adaptation measures could limit these losses to approximately 4.89% of GDP per capita.
A Shift in Understanding Climate Vulnerability
Traditionally, it was believed that countries in warmer climates would bear the brunt of climate change’s economic impacts. However, this study overturns that notion. Canada, for instance, is projected to experience the most significant losses, with an estimated 31% decline in per capita GDP. South Africa and the United States follow closely, each facing projected losses of 28%. Other nations, including Russia, Greece, Saudi Arabia, the UAE, South Korea, Mexico, and Australia, could see declines of 24% or more.
Even countries in the Nordic region, often considered climate-resilient, are not immune. Sweden could lose 20% of its per capita GDP, while Finland, Norway, and Denmark face potential losses of 18%, 17%, and 15%, respectively.
The Cost of Inaction
The authors of the study emphasize that the cost of inaction could amount to 12-14% of global GDP by 2100 under high-emissions scenarios with slow adaptation. “Go back less than a decade, and most economists would argue that climate change was something that only hotter, southern countries needed to worry about,” the authors stated. “We have challenged this assumption, showing that climate change reduces income in all countries, hot and cold, rich and poor alike.”
The research highlights that while countries in hotter climates and low-income nations face disproportionately severe impacts, losses in colder climates are also significant. The faster rate of temperature increases in these regions introduces unique challenges that cannot be overlooked.
Urgent Call for Action
The researchers warn that “no country is immune from the impact of climate change if greenhouse gas emissions are not curtailed.” They stress the necessity for urgent action to address climate change and protect economies from further income losses.
In a related development, The Energy and Resources Institute (TERI) in India has launched Version 2.0 of the Green Budgeting Toolkit, aimed at helping governments, academia, and civil society integrate environmental concerns into fiscal planning. This initiative reflects a growing recognition of the need for sustainable economic practices in the face of climate change.
Green Budgeting Initiatives
Several Indian states and Union Territories are already implementing green budgeting strategies, showcasing the potential for systemic change. For instance, Bihar has expanded its green budget more than 4.5 times between 2020-21 and 2025-26, with the number of schemes tripling. Assam has also scaled up its green budget by 1.6 times in just two years, with the number of schemes rising nearly sixfold. Puducherry, the first Union Territory to adopt green budgeting, increased its allocations by 3.6 times between 2022-23 and 2025-26. Other states, including Kerala, Meghalaya, Odisha, and Rajasthan, have also initiated environment- or climate-focused budgeting exercises.
Globally, green budgeting is gaining traction as well. Countries like France categorize budgets by impact, while Indonesia integrates climate considerations into its fiscal planning. The Philippines tags budgets for climate-related expenditures, and the European Union tracks climate funds, reflecting a broader shift towards sustainable economic practices.
Conclusion
The findings of this study serve as a wake-up call for policymakers and citizens alike. The economic ramifications of climate change are far-reaching and affect every nation, regardless of its geographical location or economic status. As the world grapples with the realities of climate change, the urgency for collective action has never been clearer. The integration of environmental considerations into fiscal planning, as demonstrated by initiatives like green budgeting, could be a crucial step toward mitigating the impending economic crisis. Without decisive action, the projected losses in global GDP could become a stark reality, underscoring the need for immediate and sustained efforts to combat climate change.
