A paper first published in April 2024 in Nature predicted that climate change costs would reach US$38 trillion annually by 2049. Entitled, The Economic Commitment of Climate Change was subject to questions about the data and methodology, leading the authors to retract the paper and issue a revision today.
A summary of the newly posted preprint paper, which has yet to be peer reviewed, follows. The authors are Leonie Wenz, Maxmilian Kotz and Anders Levermann from Potsdam University in Germany. In critiques of the original analysis, projections of a global drop in GDP by 2100 were questioned as substantially larger than in peer-reviewed studies covering the same subject. The authors revisited both their data sources and methodology, and what follows is a summary of the newly issued preprint. In it, the original 61% drop in global GDP by 2100 has been substantially reduced. Mind you, the numbers still point to the urgency to address climate change.
“The Economic Commitment of Climate Change”
The revised paper assesses the economic impacts of climate change, highlighting the commitment to significant income reductions due to historical emissions and socioeconomic inertia. It points to a world economy on course to see between a 6% and 31% reduction in GDP, with the mean being 17% by 2050. Committed climate damages already outweigh mitigation costs by a factor of over five over the next 25 years.
How did the authors come up with these new numbers? The revised methodology addresses criticism of historical data and applied statistical uncertainties. The updated methodology takes into consideration corrections to historically inaccurate economic data that was first fed into the model. The revisions have corrected the historic inaccuracies and updated the methodology in what is now deemed to be a more accurate result, showing a median estimate of global damage from climate change reduced to 17%.
Magnitude of Projected Economic Damages
The projected economic damages from climate change in this study are larger than previous estimates due to improved methodologies, steeper temperature responses in subnational data and the inclusion of additional climate variables. The authors claim their approach is conservative, even with projected reductions of 17% supported by climate change models compared to historical data.
Missing Impacts and Spatial Spill-Overs
The assessment of climate damages does not encompass all potential impacts, leading to conservative estimates. Important channels like heatwaves, sea-level rise, and tropical cyclones have not been included in damage estimates.
Non-market damages, such as those to ecosystems and human health, are also excluded.
The analysis does not evaluate potential spill-over effects from local impacts to neighbouring regions, which could amplify damages.
Current literature suggests that trade plays a significant role in propagating spill-over effects.
Preliminary assessments indicate that accounting for spatial spill-overs could amplify the overall magnitude and heterogeneity of impacts.
What and Where Will the Worst Economic Damages Fall?
What does that mean for the planet? Climate damages are projected to be $32 trillion by 2050, with current mitigation costs estimated at $6 trillion, indicating that overall, the climate change damage projected is more than five times greater than previous studies have estimated, a disparity that highlights the urgency for climate action.
Significant regional disparities are apparent in the data, with the largest losses projected to occur in lower latitudes, particularly those parts of the planet with lower historical emissions and income. North America and Europe will face median income reductions of approximately 8% and 7%, respectively, while South Asia and Africa will be most affected, with median income reductions of about 22% and 21%.
The countries with lower historical emissions and lower income per capita will face average income losses ranging between 6% and 22% with a mean of 13.6%. The losses in these countries, when compared to high-emission wealthy countries, will be between 1% and 14% with a mean of 5.7%, highlighting the disparities of climate change injustice.
Changes in average temperature are seen as the primary driver of economic climate damage. For each additional 1°C (1.8°F ) of warming by 2050, global GDP is projected to drop by 20%. With only temperature change to consider, projections of a 14% income reduction are predicted by 2050. With variability in temperatures, the negative impact could rise by as much as 26%.
Conclusion and Future Implications
To come up with these numbers, the study needed to contextualize projected climate damage against historical economic development. Historical growth rates of global GDP per capita have averaged 1.8% over the past 50 years, with poorer regions growing at 0.84%. The implied damages based on historical climate change, therefore, are deemed to be consistent with economic development trends.
The damage from climate change will be significant and will disproportionately affect lower-income and lower-emission countries. The future changes to annual precipitation may bring economic benefits except in areas like the Mediterranean and central South America, where climate models project much drier conditions. Changes, however, in the frequency of extreme rainfall events globally will counter the overall benefit of a wetter atmosphere.
Policy Implications of Climate Damages
There are already baked-in economic damages from climate change, and they are beginning to outweigh mitigation costs. The incurred damages are indistinguishable across emissions scenarios until the mid-century, and after emphasizing the economic benefits of investments in mitigation.
Adaptation strategies may help reduce committed damages, but the urgency for mitigation remains clear. Regional estimates of mitigation costs could provide insights into national incentives for climate action.
