EXPERT REACTION: Climate change is set to drop the world's income by 19% and Australia will feel the pinch

Media release

Climate change: Economic costs associated with climate change 

The global economy could experience an average income reduction of 19% by 2049, reports a study published in Nature. These new models shed further light on the potential consequences of unrestrained carbon emissions and suggest that these will not be felt evenly across the world.

Projections of the economic damage of climate change are crucial to the adaptation and planning procedures of both public and private entities. However, models are often limited by the daunting and variable nature of long-term climate outcomes. Leonie Wenz and colleagues model the potential effects of climate scenarios on economic productivity using local temperature and precipitation data from more than 1,600 regions worldwide in combination with climate and income data from the previous 40 years and climate projections.

The projections indicate that due to previous emmisions, the world economy will experience an income reduction of 19% by 2049 in comparison to a baseline with no climate change impacts. These estimated damages would already outweigh the costs associated with limiting warming in accordance with the Paris Climate Agreement by six times, highlighting the monetary benefits of mitigation in the second half of the century. These damages are primarily attributed to temperature variation; however, the authors posit that the consideration of additional climate variables raises estimates by a further 50%. In addition, countries with the lowest income and lowest historical emissions are predicted to suffer income loss that is 61% greater than the higher-income countries and 40% greater than higher-emission countries, suggesting that further warming will exacerbate the effects of climate injustice.

These figures suggest that the world economy is on course to suffer significant damage from human-caused climate change, with the lowest-income countries the most vulnerable to income loss.

***