A new study by Australian scientists has revealed that the impact of global warming on wealth has been significantly underestimated. According to the research if global temperatures rise by 4 degrees Celsius, the average person’s wealth could decrease by as much as 40%, which is almost four times higher than previous estimates.
The study also forecasts a 16% reduction in global GDP per person if temperatures increase by just 2 degrees Celsius, much higher than earlier predictions that suggested a 1.4% drop. Analysis corrects an oversight in current economic model underpinning global climate policy, toppling previous carbon benchmarks.
Even if countries meet both near-term and long-term climate targets, the study suggests that global temperatures will still rise by 2.1 degrees Celsius. These alarming findings highlight the dire consequences of climate change on economic stability and the wealth of individuals across the globe.
Professor Andy Pitman a climate scientist at UNSW and co-author of the research stated, “It’s in the extremes when the rubber hits the road It isn’t about average temperatures. Retooling economic models to account for extremes in your part of the world and its impact on supply chains feels like a very urgent thing to do so countries can fully cost their economic vulnerabilities to climate change and then do the obvious thing cut emissions.”
Some economists have suggested that global losses from climate change might be partially offset by warming benefits in colder regions, such as Canada, Russia, and northern Europe. However, lead researcher Professor Steve Neal noted that global economies are interconnected, and climate-related economic disruptions in one region will have ripple effects worldwide.
Professor Frank Jotzo climate policy expert at Australian National University who was not involved in the study, criticized existing economic climate models for oversimplifying climate change’s economic impact. He pointed out that current integrated assessment models (IAMs) assume that if climate change makes an activity such as agriculture unviable in one area, it will simply shift to another location. This assumption fails to account for broader economic disruptions, supply chain breakdowns, and the cost of adaptation.
Jotzo explained “The result is that the models say climate change makes little difference to the future world economy, which is contrary to what physical impact science and a nuanced understanding of economic interdependencies would suggest”.
The study serves as a wake-up call for policymakers and businesses to rethink economic strategies and increase climate resilience. It reinforces the urgent need for substantial emissions reductions and more accurate economic assessments of climate risks to protect global wealth and economic stability in the coming decades.