Climate change’s toll on agriculture, disease and physical infrastructure, as well as redirected government spending, among other issues, could cause the global economy to lose $23 trillion, 10 percent of its value, by 2050, according to a study released Thursday by a global reinsurance company.
“Climate risk is a systemic risk, one that can be managed with coordinated global policy action,” the Swiss Re report said.
“To this end we should see more policy action on carbon pricing coupled with incentivising nature based and carbon-offsetting solutions.”
The report’s stark projections, which coincide with Earth Day and global climate meetings hosted by President Biden, show that the poorest countries would be the hardest hit.
Countries in the OECD — a group of the world’s richest countries — would see a 5 percent reduction in the size of their economies, compared to 9 percent in South America and nearly 17 percent in the Middle East and Africa, and 25 percent in the ASEAN countries.
The main forms of economic harm would come through physical risks, such as property damage and trade disruptions from increased levels of severe weather events, lost productivity and transition risks, such as governments redeploying scarce resources to adjust and battle the changing climate.
The bleak report takes the view that some level of climate change is already here to stay, and will cause economic harm down the line.
Its baseline assumes that the world sticks to Paris Agreement targets of keeping temperatures from rising 2 degrees Celsius, which would imply a 4.2 percent reduction in the projected global economy relative to no further temperature increases.
More likely, however, is a 2 to 2.6 degree increase, which would result in an 11 to 13.9 percent level of economic loss, about 10 percent higher than the baseline.
A worst-case scenario, in which temperatures rise 3.2 degrees, would lead to an 18.1 percent loss in economic output by mid-century.
At Thursday’s summit, Biden is expected to set a new goal for the U.S. to cut carbon emissions by half by 2030. Global cooperation, however, will be necessary to keep temperatures from rising above 2 degrees Celsius.