The True Cost Of Climate Change Is Only Just Becoming Apparent
The True Cost Of Climate Change Is Only Just Becoming Apparent
We need to brace ourselves.
Remember the horrific impact of the 2008 financial crisis? We all either were deeply affected or knew someone who was. Millions of people lost their jobs, vast swathes of homes were foreclosed, and the price of living skyrocketed. Multiple generations still carry the deeply damaging trauma of being squeezed so tightly and suffering for so long because of this financial crash that wasn’t their fault. Well, I have some troubling news: climate change will create economic conditions that will make 2008 look like a pleasant day at the beach. Let me explain.
Three recent studies have revealed the extent of how badly climate change will influence the global economy. These studies used different methods and data to draw their conclusions, but worryingly, they all drew almost identical results, suggesting these predictions are incredibly sound.
Let’s start with the most recent study, which was conducted by the Green Finance Institute that is financed and supported by the UK government. They found that the breakdown in the UK’s natural environment and of the foreign locations the country depends upon will lead to a 12% loss of GDP by the 2030s. In fact, just the loss of natural habitats within its own borders will lead to a 5% drop in GDP. For some comparison, in 2008, the UK’s GDP declined by just over 4%. One of the primary drivers of this economic loss was how UK banks would have to reduce their exposure to the worst-hit industries, such as agriculture, food imports, property and tourism, or find themselves increasing the risk of losses from bad loans.
Just a reminder that this is all by the 2030s, and we won’t feel the full force of climate change until after 2050. This already horrific situation is only set to get significantly worse! As someone who is bringing up a child in the UK, this utterly terrifies me.
But it isn’t just the UK at risk.
The European Central Bank (ECB) has also conducted an alarming internal study. The ECB is responsible for managing the banks in economic regions that use the Euro currency. After decades of investing in and funding fossil fuels, a year ago, they decided it would be a good idea to see if this climate change thing could impact their investments and loans. They found that 75% of European bank loans (totalling $4.6 trillion/€4.6 trillion) depend on a healthy ecosystem. Climate change is set to destroy between 23% and 42% of Europe’s ecosystems. As such, the eurozone could face over a trillion Euros worth of loans defaulting, which is enough to cause a recession on the same scale as 2008. However, Europe, like the UK, is a huge importer, and as such, its economy is also dependent on foreign economies that will also be hit. There will also be more economic losses due to climate change in Europe than just defaulting loans. As such, this demonstrates that Europe’s financial losses from climate change will be significantly larger than in 2008!
So, is there anywhere on Earth that is safe? Well, no. This is where the third study comes in.
Swiss Re, an insurance group, recently studied the effects of climate change on the entire global economy. They found that due to climate change, the global GDP will decline by 18% by 2050 at our current rate of warming (3.2°C of climate change by 2050). That is a level of economic loss 4.5 times greater than 2008! Avoiding this level of warming requires significant changes in the next 5–10 years, like the complete phase-out of coal energy within this time frame. Such actions are incredibly unlikely. But even if we did manage to curb this warming to levels acceptable by the Paris Agreement (below 2°C warming), the global economy would still incur a loss equivalent to 2008.
With all these studies, it’s important to remember that the damages they talk about are much more impactful than the 2008 crash. We could recover from 2008, whereas we can’t recover from losses due to climate change. So when the Swiss Re says meeting the Paris Agreement will create economic losses equivalent to the 2008 crash, it’s more like we will have to experience the hardships of the 2008 crash for decades!
It’s also tempting to think that, unlike the 2008 crash, this economic damage will be slow and unnoticeable. Firstly, just as the lobster in the warming pot eventually dies, this doesn’t lower the overall impact. What’s more, slowly being squeezed like this has colossal psychological effects on people. But, as we have seen over the past four years, climate change isn’t a linear progression; it happens in sudden jumps and swings thanks to phenomena like El Niño and climate tipping points. So over the next few decades, it might be more like we experience sudden global financial losses equivalent to the 2008 crash roughly every five years, amounting to a total of 18% loss in global GDP by 2050.
We can stop this. We have the technology to curb emissions, slow ecosystem damage, and mitigate this catastrophic future. What we don’t have is the financial tools to weather this upcoming economic storm. It’s time we approached climate technology as economic protection and an investment in a prosperous future, not an expensive exercise in saving nature. We are, after all, inexorably linked to nature, no matter how hard we try. But the window for action is rapidly closing. The question is, can we act before it is too late? Or will we let fossil fuel and short-term greed rob us of our future?
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Sources: The Guardian, WE Forum, Will Lockett, Washington Post, WE Forum, PNAS, RGE Monitor