Climate change to cost world economy $23trn by 2050

Rising temperatures could cost the global economy over $23 trillion by 2050 and poor countries like Nigeria will be particularly hard hit from fall in crop yields and rising seas which will consume coastal cities, a new report has found.

According to a study by Swiss Re, one of the world’s largest providers of insurance to other insurance companies, the effect of climate change is expected to shave 11 percent to 14 percent off global economic output by 2050.

The research states that this is a real scenario if temperature increases stay on the current trajectory, and both the Paris Agreement and 2050 net-zero emissions targets are not met.

The Climate Economics Index stress-tests how climate risks will impact 48 countries representing 90 percent of the world economy and ranks their overall climate resilience. It shows all countries will be affected, but some are more vulnerable than others.

“Our analysis shows the potential costs that economies could face should governments fail to act more decisively on climate,” said Patrick Saner, who is in charge of global macroeconomic forecasts for Swiss Re.

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If countries succeed at holding average global temperature increases to less than two degrees Celsius above preindustrial levels — the goal set by the 2015 Paris accord, an agreement among nations to fight climate change — economic losses by midcentury would be marginal, according to Swiss Re. The company found that most countries’ economies would be no more than 5 percent smaller than would otherwise be the case.

But current emission levels are far from those targets. Global temperatures are likely to increase as much 2.6 degrees by 2050 based on current trajectories, Swiss Re reported.

If that happens, the economy of the United States would be as much as 7 percent smaller than in a world without climate change, the report estimated. Other wealthy Western nations, including Canada, Britain and France, could lose between 6 percent and 10 percent of their potential economic output.

For poorer nations, which tend to be more exposed to warmer temperatures but have less ability to adapt their infrastructure and economies in response, the consequences would be far more dire.

Even if the increase in global temperature is held to two degrees Celsius, Malaysia, the Philippines and Thailand would each see economic growth 20 percent below what they could otherwise expect by 2050, Swiss Re estimated. At 2.6 degrees, each country would have one-third less wealth than would otherwise be the case.

And that’s not the worst-case scenario. Swiss Re also modeled the economic impacts of a 3.2-degree increase by 2050, which it described as the “severe case” for temperature gains.

If that happened, levels of wealth in Malaysia, the Philippines, and Thailand would drop almost by half compared with a world with no climate change. The economy of Indonesia would be 40 percent smaller. India’s would be 35 percent smaller.

The report which came out the day the US and 40 other countries are considering renewed commitments to cut greenhouse gas effects, highlights how high the stakes are for humanity.

This climate crisis will affect how insurance companies price risks.

“For hazards where the confidence of a direct link with global warming is medium/high, such as heatwaves, wildfires, droughts and torrential rainfall, we are adjusting our pricing models,” Jerome Jean Haegli, Swiss Re’s chief economist, said in a statement.