Global GDP Faces 50% Loss Without Climate Change Action, Study Finds

The global economy could face a 50% loss in gross domestic product (GDP) unless immediate action is taken to tackle the growing climate crisis, according to a new analysis.

The study by reseachers at the Institute and Faculty of Actuaries (IFoA) and the University of Exeter warns development, wellbeing and economic health are “intertwined with and dependent” on the stability of Earth’s eco-system.

The analysis says the planetary eco-system is being threatened by climate change and nature loss and global GDP could contract by 50% between 2070 and 2090 without urgent action.

It adds policymakers must recognise this dependence and act now, because the “current market-led approach to mitigating climate and nature risks is not delivering”.

It says global populations are already impacted by food system shocks, water insecurity, heat stress and infectious diseases.

And it claims if the situation remains unchecked, mass mortality, mass displacement, severe economic contraction and conflict will become more likely.

The study calls for a framework for global risk management to address the growing climate crisis and show how this approach can support future prosperity.

One of the report’s lead authors, Dr. Jesse Abrams from the University of Exeter’s Green Futures Solution program said we are “grossly underestimating risk due to climate change and nature-related crises” in an interview.

Dr. Abrams added many current risk models are only looking at rising temperatures and precipitation, and are not factoring in compounding extreme weather events, like floods, droughts and heatwaves.

“Upfront risks like floods and wildfires are actually happening faster than climate scientists had previously projected,” he told me.

“And their frequency and intensity is outpacing, as well. These extreme weather events will disrupt infrastructure, destroy homes and disrupt supply chains.”

Dr. Abrams added there are also cascading risks from potential tipping points, which may come in the future, which will also impact the global economy.

He said these include the possible shutdown of the Atlantic Meridional Overturning Circulation (AMOC), which is a system of ocean currents that circulates water within the Atlantic Ocean, bringing warm water north and cold water south.

He added some scientists estimate this could occur as early as 2050, and if it does, it could reduce suitable land for growing wheat and maize by up to half compared to a world without climate change.

Dr. Abrams said there is an urgent need for more realistic risk assessment that accounts for systemic risks and tipping points, with climate risk being treated with the same rigor applied to financial system risks.

And he said it was vital decarbonization is accelerated through policy support and positive socio-economic tipping points

“We have left it too late for incremental change,” he explained.

“We now need to look at how we can trigger tipping behaviour in order to achieve non-linear change in socio economic and technological systems.”

Heather Plumpton, head of research at Green Alliance, said the new report puts in stark focus how much the economy and prosperity depend on nature in an email.

Plumpton added it also shows how conventional economic models used by governments and financial institutions don’t take account of irreversible climate tipping points that will amplify the economic destruction.

“For too long the government has disregarded the financial risks that nature loss creates, but these are getting too high for our economy to bear,” she said.

“The government must take urgent action to restore nature across the country, to futureproof the economy against future shocks.”

IFoA president Kartina Tahir Thomson said the report shows that now more than ever we need to continue working with policyholders, governments, scientists and other stakeholders, to come up with a solution that will address this emergency, for the benefit of all of society in a statement.