Climate change could lead to losses worth $38 trillion every year by 2050, study warns

A new study warns that climate change could cut global economic output by 20 per centby 2050. Researchers from the Potsdam Institute for Climate Impact Research (PIK) published their findings in Nature on Wednesday (April 18).

As per the PIK’s calculations, countries meet ambitious emission-cuttinggoals, but as many of them fall short, the actual damage could be even worse.

The study estimates climate change could cost the global economy a staggering $38 trillion every year by 2050. This is six times more expensive than the estimated cost of limiting global temperatures to 2 degrees Celsius above pre-industrial levels.

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The study further states that despite damage affecting various regions to different degrees, poorer regions and those contributing least to global warming will be hit hardest.

Anders Levermann, a senior PIK scientist, says, “Countries that are least responsible for climate change are expected to suffer income loss that is 60per centmore than the higher-income countries and 40per centgreater than higher-emission countries.”

The industrial economies of Germany and the United States would shrink by roughly 11 per centby mid-century (13per centfor France), even if climate action is properly taken, according to the researchers.

PIK researchers built their analysis on 40 years of climate data from over 1,600 regions. These estimates don't include the additional costs of extreme weather events like storms and fires, which climate change is also worsening.

"High-income losses are projected for most regions, including North America and Europe, with South Asia and Africa being the hardest hit," according to Maximilian Kotz, one of the study's authors. "These losses are caused by a wide range of economically relevant effects of climate change, such as consequences for agricultural yields, labor productivity and infrastructure."

As per the World Bank, global GDP surpassed $100 trillion in 2022 and is expected to double by 2050, if not for the drag of climate change.

Some experts believe the PIK estimate is likely an understatement of the true economic impact of climate change. This aligns with the findings of the Stern Report, a 2006 analysis by economist Nicholas Stern commissioned by the UK government, which reached similar conclusions.

The Stern Review, another study published in 2006, echoes similar concerns. It projected that climate change could inflict economic damage equivalent to a 20per centreduction in global GDP by 2050.

The report also said that thecosts of mitigating climate change would be significantly lower than the long-term economic burden of inaction.

(With inputs from agencies)