If nothing is done to combat climate change, global temperatures could rise by 3.2 ° C by 2050, reducing the global economy by 18%, according to a new study by Swiss Re.
Climate change poses the greatest long-term threat to the global economy, but its impact could be mitigated if decisive action is taken to meet the targets set in the Paris Agreement, the new economy index of the United Nations said. climate from the Swiss Re Institute. (The Paris Agreement commits to keeping the average global temperature below an increase of 2 ° C).
However, Swiss Re stressed that climate change will have economic costs even if the goals of the Paris Agreement are met.
The Swiss Re Institute conducted a stress test to examine how 48 economies (representing 90% of the global economy) would be affected by the continuing effects of climate change in four different scenarios of temperature rise.
The expected impact on global GDP by 2050 according to these four scenarios in relation to a world without climate change is:
- An 18% decrease if no mitigation measures are taken (with a 3.2 ° C increase in temperatures);
- A decrease of 14% if certain mitigation measures are taken (with a temperature increase of 2.6 ° C);
- An 11% decrease if other mitigation measures are taken (with a 2 ° C increase in temperatures);
- A decrease of 4% if the objectives of the Paris Agreement are met (below a 2 ° C increase)
In a severe scenario of a 3.2 ° C temperature rise, China risks losing nearly a quarter of its GDP (24%) by mid-century, according to the report. In contrast, the United States, Canada and the United Kingdom would all suffer a loss of around 10%, while Europe would suffer a little more (11%). Economies like Finland or Switzerland are less exposed (6%) than, for example, France or Greece (13%).
“As global warming worsens the impact of weather-related natural disasters, it can lead to substantial losses in income and productivity over time,” the report says. “For example, rising sea levels result in the loss of land that could otherwise have been used productively, and heat stress can lead to crop failures. The emerging economies of the equatorial regions would be the most affected by the rise in temperatures. “
Country resilience to climate change
In addition to examining the expected economic impact on each country, the Swiss Re Institute also ranked each country based on its vulnerability to extremely dry and wet weather conditions, as well as its ability to cope with the effects of climate change.
He revealed that the countries most affected are those with the fewest resources to adapt and mitigate the effects of rising global temperatures. “The most vulnerable countries in this context are Malaysia, Thailand, India, the Philippines and Indonesia. The advanced economies of the northern hemisphere are the least vulnerable, including the United States, Canada, Switzerland and Germany. “
If the more severe 3.2 ° C temperature scenario materializes, Swiss Re said, the potential output loss of the worst-affected emerging economies could increase to 45% of GDP.
“Climate change will have economic costs even if the goals of the Paris Agreement are met, but the costs could be much more serious in other scenarios. Therefore, the Paris targets remain the best possible outcome, ”says the report.
Mitigating climate change requires a range of measures, Swiss Re said in a press release accompanying the report.
“More carbon pricing policies combined with incentives for nature-based solutions and carbon offsets are needed, as well as international convergence on the taxonomy of green and sustainable investments,” he said. for follow-up.
Swiss Re recommended that, for financial reporting, institutions regularly disclose how they plan to meet the Paris Agreement and net zero emissions targets.
“Re / insurers also play a role in providing risk transfer capacity, knowledge of risks and long-term investments, using their understanding of risk to help households, businesses and societies mitigate and recover. ‘adapt to climate change.’
The transition to a low-carbon economy will only be possible if the public and private sectors come together, Jérôme Haegeli, chief economist of the Swiss Re group, said in the statement. “Global cooperation to facilitate financial flows to vulnerable economies is essential. We have the opportunity to correct the situation now and to build a world that will be greener, more sustainable and more resilient. “
Haegeli said Swiss Re’s analysis shows the benefit of investing in a zero rate economy. “For example, adding just 10% to the $ 6.3 trillion in annual investment in global infrastructure would limit the average temperature rise to less than 2 ° C. This is only a fraction of the loss. of global GDP that we face if we do not take the right measures. “
“Climate risk affects every society, every business and every individual. By 2050, the world’s population will reach nearly 10 billion people, particularly in the regions most affected by climate change, ”said Thierry Léger, group underwriting director and president of the Swiss Re Institute.
“So we need to act now to mitigate the risks and achieve the net zero goals. Likewise… nature and ecosystem services provide enormous economic benefits but are under serious threat. This is why climate change and the loss of biodiversity are two challenges that we must face as a global community to maintain a healthy economy and a sustainable future, ”continued Léger.
The report by the Swiss Re Institute is titled “The Economics of Climate Change: No Action Not an Option”.
Climate change trends Swiss Re