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Study: Global economy is at risk of shrinking sharply due to climate impacts

Study: Global economy is at risk of shrinking sharply due to climate impacts

According to researchers, the climate crisis also threatens economic prosperity. Other measures would be significantly less expensive for the economy.

According to a new calculation, the global economy is at risk of shrinking by around a fifth by the middle of the century as a result of global warming – even if emissions of climate-damaging gases were drastically reduced in the future. Otherwise, much greater economic damage than $38 trillion per year can be expected, as researchers from the Potsdam Institute for Climate Impact Research (PIK) calculated in a study published in the journal Nature.

The authors write that this damage would be six times higher than the estimated costs for climate protection measures to limit global warming to a maximum of two degrees.

German economy could shrink by 11 percent

Depending on the region, the expected damage varies greatly. The poorest countries and those least responsible for climate change will be hit hardest, the study says. For Germany – as for the USA – the researchers predict that the economy will shrink by 11 percent by the middle of the century, compared to a scenario without climate impacts. The information refers to a scenario in which it is possible to get on a path that can limit global warming to below two degrees by the end of the century. According to the United Nations, the current climate protection plans are not yet sufficient.

“Significant income losses are forecast for most regions, including North America and Europe, with South Asia and Africa hardest hit,” wrote Maximilian Kotz, one of the study authors. “These losses are caused by a wide range of economically relevant impacts of climate change, such as impacts on agricultural yields, labor productivity or infrastructure.” Damage from storms or forest fires is not included, but could further increase the amount of damage.

For the calculation, the researchers evaluated data from the past 40 years from more than 1,600 regions on how weather extremes have influenced economic growth. Based on climate models, they calculated how these are likely to have an economic impact over the next 26 years.

Coming damage due to emissions that have already occurred

Researcher Leonie Wenz pointed out that the expected damage was the result of the greenhouse gases that had already been emitted. In order to cushion this, adjustment measures are needed. “In addition, we must drastically and immediately reduce our CO₂ emissions – otherwise the economic losses will be even higher in the second half of the century and reach a global average of up to 60 percent by the end of the century,” said Wenz.

The current calculations by the Potsdam team are surprisingly close to the forecasts known as the Stern Report, which the economist Nicholas Stern calculated almost 20 years ago on behalf of the British government: Climate change is threatening the international economy with a decline of around 20 percent it in the study presented in 2006. The conclusion back then was that climate protection was expensive – but no climate protection was even more expensive.

“The urgency of action cannot be emphasized often enough,” said Matthias Kopp from the environmental association WWF Germany to the dpa. “The longer we delay, the more difficult and costly it will be to mitigate the consequences of the climate and environmental crisis.”

Source: Stern

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