Apr 18, 2024 - Energy & Environment

Climate change may cost $38 trillion a year by 2049, study says

Projected change in income due to climate change by 2049
Data: Potsdam Institute for Climate Impact Research; Chart: Rahul Mukherjee/Axios

Climate change through the middle of this century is likely to be far costlier than thought — to the tune of $38 trillion per year, a new study finds.

Why it matters: The study finds the world economy is already headed for a loss of 19% of income per capita around the globe within the next 26 years due to historical emissions that will continue to warm the planet.

  • The study, published Wednesday in the journal Nature, shines a new light on the patterns and severity of climate change's economic impacts while bolstering key conclusions from other research.
  • The $38 trillion figure is given in 2005 dollars.
  • It is more than double the annual GDP of the entire European Union.

Zoom in: The paper, from three scientists at the Potsdam Institute for Climate Impact Research in Germany, found that the likely economic damages of climate change during the next quarter century outweigh by six times the costs of mitigating global warming and holding it to 2°C above preindustrial levels.

  • The research is novel since it focuses on subnational regions, rather than looking at broader geographical areas.
  • It examines climate's economic impacts during the past 40 years in about 1,600 subnational regions and then projects such impacts out to 2050.

How it works: The researchers examined how climate change is likely to change daily temperature variability, total annual precipitation, the annual number of wet days and extreme daily rainfall that occur, plus the shifts already identified by changing average temperatures.

  • The study finds that the economic impacts of climate change are likely to be far more persistent than previous studies have shown.
  • For example, study coauthor Anders Levermann tells Axios via email that "a change in annual mean temperature will yield a change in [the] economic growth rate that persists for about 8-10 years."

Between the lines: The new research is likely an underestimate of the economic hit from climate change since it does not include the impacts of sea level rise, stronger hurricanes, heat waves and human health effects, along with other costly influences.

  • The study shows that the largest economic losses are likely to take place at warmer latitudes, with the countries least responsible for historical emissions absorbing outsized economic damages.
  • However, the U.S. and EU would be significantly affected, the study shows, with per capita incomes increasing but by smaller amounts than they otherwise would have in the absence of climate change. (In the short-term, far northern latitudes could see net economic benefits from climate change, purely from a numbers perspective.)
  • "The study is consistent with previous studies but finds even higher damages. It shows that also rich countries suffer enormous economic consequences of climate change," Levermann tells Axios. "These arise not only from destruction due to weather extremes, but also through ... perturbations of the economic flow which is less easily detected and thereby less easily adapted to and countered."
  • One message of the study is the necessity of making sharp, near-term emissions cuts to avoid even larger economic losses after mid-century.

Yes, but: The damages, with an average person losing 19% of their income through midcentury, are compared to a baseline of a world without human-caused climate change.

  • This means that many places would still see incomes grow, but at a slower pace and to a lower extent than they would have otherwise.

What they're saying: Outside researchers who were not involved in the new study told Axios that it adds valuable information and builds upon previous work.

  • "I think the paper's main finding that there are committed damages from climate change over the next few decades, and that these damages can be large, makes a lot of sense," said Marshall Burke of Stanford's Doerr School of Sustainability, via email.
  • He said the study makes the point that even small amounts of warming over a few decades can have "very large economic impacts."
  • "This is believed by some but not by others," he said, noting he agrees with that point. 
  • Amir Jina, a climate and economics researcher at the University of Chicago, said the precise numbers in the study may be off, but the main points and trends are supported by other studies.
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