The Surging Economic Impacts of the Climate Change

The temperature was 1.06 °C above pre-industrial levels across the world making 2022 the fifth hottest year on record, and 2023 is on track to be one of the hottest ever recorded. As the climate change excrabate, it continues to show evidence in terms of extensive heatwaves, droughts, flash floods and other weather extremes across the globe.

With this, the climate change has been one of the prominent non – traditional security issue affecting the national economics and also widening them into transnational issues across the globe.

Recently, the University of Delaware 's Gerard J. Mangone Climate Change Science and Policy Hub released a report titled “Loss and Damage Today: How climate change is impacting output and capital” at the horizon of the start of COP28 in Dubai.

This research provides a strong correlation between GDP losses due to climate change and rising temperatures. Since 1970, it has been observed that a nearly linear increase in global temperatures of 1°C is in pace with a corresponding reduction in global population – weighted GDP by approximately 6.3%.

In addition, the report also provided to explain the interlinkages and complex dynamics between climate change, economic outcomes and capital investments.

Some of the key highlights:

1. Across the globe, the climate change has led to a population – weighted GDP loss of 6.3% in 2022, considering direct, spill-over and capital losses, whereas the unweighted percentage of global GDP lost is estimated at 1.8%, or about U.S. $ 1.5 trillion.

2. The difference between aforementioned 2 numbers reflects the uneven distribution of the impacts of climate change, which concentrated in low – income countries and tropical regions that typically have more population and less GDP.

Table 1: Total changes to GDP and capital bases, reported in 2015 USD.

3. Negative fallout of the climate change: The least developed countries (LDCs) are most exposed to the impact of the climate change with an average population – weighted GDP loss of 8.3%. The African countries have experienced an average loss of 8.1% of GDP in 2022 and Southeast Asia - most severely impacted region has suffered an average loss of 14.1% of GDP. This loss highlights the vulnerability of these regions to climate disruptions and their negative socio – economic effects.

4. Some positives of climate change constrained by the time: However, some regions, particularly Europe and northern Asia, are seeing the economic benefits from climate change. Europe and Central Asia are both estimated to have GDPs 4.7% higher than they would have had without climate change.These benefits arise from reduced winter chill, which lowers energy consumption and mortality rates, among other factors. However, due to continued global warming, these benefits will be eventually eroded and eventually turn negative, with the energy and health effects of hotter summers gradually offsetting benefits from mild winters. The U.S. and China are currently near the point where losses under hotter temperatures outweigh benefits from milder winters. The U.S. saw essentially no gain or loss in GDP in 2022 relative to a non-climate-changed world, while China experienced a 1.8% loss (U.S. $290 billion).

5. Climate – induced excrabating economic inequalities between developed and developing nations: The climate change has increased the economic inequality gap between developed and developing nations highlighting the disproportionate burden of climate change on the developing world. For OECD countries, climate change has had little net impact (0.3% gain). These countries are collectively seeing a net gain of approximately U.S.$ 636 billion (constant 2015 USD). Meanwhile, the rest of the world has experienced an estimated net GDP loss of U.S. $ 1818 billion and countries in the Global South have experienced an average loss of 8.3% of GDP.

6. Impacts of the climate change on the developing world (Global South): The low and middle – income group of countries are mostly in tropical and sub – tropical regions mostly dependent on the agriculture. These countries are particularly vulnerable to many forms of future climate change and facing significant capital losses, threatening their long – term economic growth and resilience. They have experienced produced capital losses worth of U.S. $ 2.1 trillion due to climate change. When GDP and capital losses are combined, it was found that these groups of countries have experienced a total loss of U.S. $ 21 trillion since the Rio Convention was adopted in 1992.

7. Climate – induced economic impact on the UNFCCC party groupings: ?Many coalition groups that represent developing countries at Conference of the Parties (COPs) have experienced average losses in 2022 of 5 – 10% of their GDP except the European Union and Umbrella groups due to climate change impacts. The average loss for the G – 77 is 5.5% of GDP (U.S.$ 1.9 trillion), for Africa is 8.0% (U.S. $240 billion), for LDCs is 8.3% (U.S. $110 billion) and for Small Island Developing States (SIDS) under the Alliance of Small Island States (AOSIS) is 4.3% (U.S. $ 70 billion) in 2022. In contrast, the European Union (EU) had an average gains in GDP of 4.2% on the background of reduced winter chill in many of its member countries. However, these are conservative estimates which excludes important impact channels and non – market losses.

Table 2: Total changes to GDP and capital bases, reported in 2015 USD, for UNFCCC party groupings.

To know more about UNFCC groupings: https://www.dhirubhai.net/pulse/chessboard-climate-negotiations-karan-gajare/

Conclusion

The climate change is already depressing economic activity across the globe especially in the Global South. With increased scientific evidence on the co - relation between climate change and macroeconomics, these revelations underscore the urgent need for global cooperation and support to address the impacts of climate change.

Read full report: https://sites.udel.edu/climatechangehub/rising-global-economic-lossdamage-report2023/