Climate change is projected to cost the global economy approximately $38 trillion annually by 2049, according to researchers from the Potsdam Institute for Climate Impact Research (PIK). This significant economic impact will result from extreme weather conditions damaging agricultural yields, reducing labor productivity, and destroying infrastructure.
A study published in Nature reveals that global income will decrease by 19% by mid-century compared to a scenario without climate change. The research, based on data from over 1,600 regions worldwide spanning 40 years, assesses the future economic effects of a warmer planet.
Lead researcher Leonie Wenz stated, “Climate change will cause massive economic damages within the next 25 years in almost all countries. We have to cut down our emissions drastically and immediately – if not, economic losses will become even bigger in the second half of the century, amounting to up to 60% on global average by 2100.”
Human activities have raised global temperatures by about 1.1°C since pre-industrial times, resulting in extreme weather events that have cost approximately $7 trillion over the past 30 years. Climate-related damages have continued to rise, averaging $500 billion annually, equivalent to 2% of the US GDP, since 2016. Developing nations, which have contributed less to global warming, are experiencing the greatest losses and damages.
The study suggests that reducing emissions and limiting global warming to 2°C by the end of the century would be the most cost-effective strategy to mitigate future climate damages. Wenz emphasized, “Protecting our climate is much cheaper than not doing so, and that is without even considering non-economic impacts such as loss of life or biodiversity. We will need more adaptation efforts if we want to avoid at least some of them.”
Countries with the least responsibility for climate change are expected to suffer income losses 60% greater than higher-income countries and 40% greater than higher-emission countries. These countries also have fewer resources to adapt to current impacts.
The economic repercussions of global warming will be felt worldwide, including in highly developed countries such as Germany, France, and the United States. The only regions expected to benefit from warmer temperatures are those at very high latitudes.
The study's findings surpass previous estimates due to the inclusion of additional climate variables such as extreme rainfall and the impacts of extreme weather events on agriculture, labor productivity, and human health.
Co-author Anders Levermann emphasized the need for a structural shift towards renewable energy, stating, “Staying on the path we are currently on will lead to catastrophic consequences.”
