A recent analysis of weather and economic data reveals that severe weather events, driven by climate change, are costing the global economy billions of dollars each year. The research highlights the growing financial impact of extreme heat, droughts, and a reduction in mild weather days, all of which are hindering economic growth.
Berkay Akyapi, Ph.D., co-author of the study and a professor of business at the University of Florida, emphasized the importance of proactive adaptation. “If we don’t do anything to respond to these climate shocks, we are hurting the economy,” he said. The study suggests that extreme heat and severe droughts can reduce a country’s GDP by about 0.2%, a figure that may seem small but equates to billions of dollars globally.
The research, conducted by Akyapi along with Matthieu Bellon, Ph.D., of the European Stability Mechanism, and Emanuel Massetti, Ph.D., of the International Monetary Fund, analyzed billions of weather observations over a 40-year period across hundreds of countries. Their findings are set to be published in the American Economic Journal: Macroeconomics.
Unlike previous studies that focused on average temperature data, which often obscured the effects of localized extreme weather, this analysis used machine-learning algorithms to correlate specific weather patterns with economic performance. Agricultural economies were found to be more vulnerable to high temperatures and droughts than industrial economies, suggesting that the effects of severe weather might lessen as more nations industrialize.
Governments often respond to these extreme weather events by increasing spending on disaster relief efforts, which can mitigate economic damage but also raise national debt. “Weather is still not the main driver of economic growth,” Akyapi said, “but the frequency of these weather-related shocks is increasing over time,” making adaptation essential to limit long-term economic fallout.
Reference: https://www.preventionweb.net/news/heat-waves-droughts-cause-billions-dollars-global-economic-losses