Climate change could shrink the world economy by 18%?

By S R Ranjan: As the world builds back better from the Covid-19 pandemic crisis that ‘overpoweringly’ impacted the economies and caused irretrievable damage to societies globally in the past two years, a new climate-economics report sounds the alarm bell for world economies – Swiss Re Institute’s stress-test analysis reveals that the world economy is set to lose up to 18% GDP from climate change in the next 30 years, if no action is taken. Are we still living in a denial or made progress in combating the climate crisis?

The world’s response to Covid-19, in the past two years, has been befitting as a global effort to end the pandemic crisis and build a better public health system, but what about the global efforts in dealing with the impacts of climate change. Are we doing enough to drive economies and reconstruct societies through green recovery solutions and plans? The answer still awaits global acceptance.

As a matter of fact, Swiss Re Institute’s new Climate Economics Index shows how climate change will impact 48 countries, representing 90% of world economy, and ranks their overall climate resilience. “Climate change poses the biggest long-term threat to the global economy. If no mitigating action is taken, global temperatures could rise by more than 3°C and the world economy could shrink by 18% in the next 30 years,” states the Swiss Re Institute’s stress-test analysis. The analysis reveals expected global GDP impact by 2050 under different scenarios compared to a world without climate change:

• 18% if no mitigating actions are taken (3.2°C increase)
• 14% if some mitigating actions are taken (2.6°C increase)
• 11% if further mitigating actions are taken (2°C increase)
• 4% if Paris Agreement targets are met (below 2°C increase)

World economies will be differently hit by the impacts of climate change. As per the Swiss Re Institute’s stress-test analysis, in the occurrence of a 3.2°C temperature increase, Asia would be hardest hit. By the mid-century, China would lose almost 24% of its GDP. The US, Canada and the UK would all see around a 10% loss. Europe would suffer slightly more 11%.

Besides the global economic analysis, the Climate Economics Index also ranks countries’ resilience to the impacts of climate change. Countries like India, Malaysia, Thailand, Philippines and Indonesia are the most vulnerable, while advanced economies in the northern hemisphere are the least vulnerable, including the US, Canada, Switzerland and Germany.

However, Climate Economics Index shows that the climate change impact can be lessened if decisive climate action is taken to meet the targets set in the Paris Agreement. For this, public and private sectors will have to play a crucial role in accelerating climate actions, like transition to net zero.

The world has to find peace with nature and adopt nature-based solutions. Coordinated measures by the world’s largest carbon emitters are crucial to meet climate targets. There is a need to facilitate and accelerate green investments for sustainable infrastructure, net-zero economy and drive climate mitigation and adaptations measures through global policy frameworks.

As said by the United Nations Secretary-General António Guterres, “The climate emergency is a race we are losing, but it is a race we can win.”

-Singh Rakesh Ranjan

Freelance Journalist

 (Representational images, Sources)