Amid Dismal Science’s (economics’) myriad failures, the facilitation of the misguided “economy vs environment” framing, wrong-headed thinking about how to act on climate, overstating costs and understating benefits of climate action, and utter failure to adequately assess (even) the economic impacts of the climate crisis merit rating as the most significant negative impact that economics has had on humanity(‘s future prospects). A just released peer-reviewed paper provides a stark indication of just how far off traditional economic works have been when it comes to climate.
Even if CO2 emissions were to be drastically cut down starting today, the world economy is already committed to an income reduction of 19 % until 2050 due to climate change
Traditional economists, the mass of the material, has played around with impact figures more in the 1, 2, 3 percent range not that 19%.
In the “middle-of-the-road” scenario, these Potsdam researchers assess “global annual damages in 2049 of 38 Trillion in 2005 international dollars”. [Note 2005: using the $ as a surrogate for “international dollars”, that 2005 $38T is about $61T in 2024 terms.] That 38T figure, however, is the median of their analytical runs for that scenario. The “likely range”? 19-59 Trillion in annual costs. At 59 trillion, this is more than a one third reduction in potential global GDP. And, that is year-in, year-out, with worsening impacts escalating into future years. (As an aside, even this could well be an understatement in terms of real impacts.)
For perspective, these researchers’ work places “the cost of even a limited period of climate change at roughly six times the estimated price of putting the world on a path to limit the warming to 2° C.”
Even with action, however, climate crisis impacts are serious and the costs are already high and will grow. We (humanity, writ large) still have a choice as to how serious and how high.
The best time to act on climate change was yesterday, the next best today, and following that tomorrow.
To provide perspective from the Potsdam team,
“Our analysis shows that climate change will cause massive economic damages within the next 25 years in almost all countries around the world, also in highly-developed ones such as Germany, France and the United States,
“These near-term damages are a result of our past emissions. We will need more adaptation efforts if we want to avoid at least some of them. And we have to cut down our emissions drastically and immediately – if not, economic losses will become even bigger in the second half of the century, amounting to up to 60% on global average by 2100. This clearly shows that protecting our climate is much cheaper than not doing so, and that is without even considering non-economic impacts such as loss of life or biodiversity.”
Serious climate action, to keep warming below 2C, could limit economic costs to (a still very painful and serious) 20% reduction across the globe. If not, “economic losses will become even bigger … 60% on global average by 2100.”
As inadequate climate economic impact analysis has enabled hindering climate action, will increasingly realistic analysis from economists help spark more aggress climate action?