The Costly Truth About Climate Change

Author: Caroline Haywood

In 2006, Lord Nicholas Stern published a widely influential review into the economics of climate change. He warned that effective, early action to reduce our greenhouse gas emissions will outweigh the costs that the world will incur once the more serious and dangerous effects of climate change begin to happen.

To reach this conclusion, Lord Stern considered the costs involved in remediating the physical impacts of climate change on the economy, on human life and on the environment on the one hand and, on the other, examined the costs of different technologies and strategies to reduce greenhouse gas emissions.

The review concludes that the economic reality of climate change is that, without action, the overall costs of climate change will be equivalent to losing at least 5% of global gross domestic product (GDP) each year. In contrast, 2% of global GDP per annum is required to be invested in mitigation actions, in order to avoid the worst effects of climate change.

In other words, the stabilisation of greenhouse gas concentrations in the atmosphere can be achieved with continued economic growth, and in fact mitigation activities are proposed to allow greater economic growth than would occur if the world failed to act on climate change.

This week, another report was published that shows that Lord Stern’s first conclusion was correct – the limited action that the international community has taken to reduce greenhouse gas emissions to date is already damaging global economic growth.

Climate change is already costing the world more than $1.2 trillion, wiping 1.6% annually from global GDP and contributing to the deaths of nearly 400,000 people a year. By 2030, the report estimates that the cost of climate change and air pollution combined will rise to 3.2% of global GDP.

The report, entitled “Climate Vulnerability Monitor: A Guide to the Cold Calculus of A Hot Planet” was carried out by the DARA group, a non-governmental organisation based in Europe, and the Climate Vulnerable Forum. It was written by a team of 50 scientists, economists and policy experts and commissioned by 20 of the world’s most vulnerable countries.

This report also confirmed another of Lord Stern’s propositions: the impacts of climate change are not evenly distributed – the poorest countries and people will suffer earliest and most. Today’s climate change impacts are being felt most keenly in developing countries, where extreme environmental disasters such as flooding and hurricanes are causing more deaths every year and damage to agricultural production from extreme weather are contributing to deaths from malnutrition and poverty. In addition, the world’s least developed countries are forecast to suffer losses of up to 11% of their GDP, due to the effects of climate change and air pollution.

In the words of the former executive secretary of the UN Framework Convention on Climate Change, Michael Zammit Cutajar, “Climate change is not just a distant threat but a present danger – its economic impact is already with us.”

Hopefully, this report – written in the global language of economics – will spur action by the world’s leaders, who must realise that they can no longer be complacent about climate change. Strong, urgent action to reduce our greenhouse gas emissions is required now, before the effects of climate change become far more costly to repair.