If no mitigating action is taken, global temperatures could rise by more than 3°C in the next 30 years and the world economy could shrink by 18 percent, reveals a new Swiss Re Institute report.
But the impact can be lessened if decisive action is taken to meet the targets set in the Paris Agreement, Swiss Re Institute’s new Climate Economics Index shows.
Swiss Re assessed four different climate scenarios and forecasted their impact on the GDP of the world’s 48 largest economies (which make up 90 percent of global GDP). The expected impact:
- An 18 percent decrease if no mitigating actions are taken (with a 3.2°C increase in temperature).
- A 14 percent drop if some mitigating actions are taken (2.6°C increase).
- An 11 percent decline if further mitigating actions are taken (2°C increase).
- A 4 percent decrease if Paris Agreement targets are met (below 2°C increase).
In a severe scenario of a 3.2°C temperature increase, China stands to lose 24 percent of its GDP by 2050. The U.S., Canada and the UK would all see around a 10 percent loss, while economies such as Finland or Switzerland are less exposed, with a 6 percent loss.
Swiss Re Institute also ranked each country on its vulnerability to extreme dry and wet weather conditions, as well as its capacity to cope with the effects of climate change. It found that the countries most negatively impacted are those with the fewest resources to adapt to and mitigate the effects of rising global temperatures: Malaysia, Thailand, India, the Philippines and Indonesia. Meanwhile, advanced economies in the northern hemisphere are the least vulnerable, including the U.S., Canada, Switzerland and Germany.
As for mitigation, Swiss Re emphasized the need for more carbon-pricing policies combined with incentives for nature-based and carbon-offsetting solutions. Institutions need to disclose how they plan to achieve the Paris Agreement and 2050 net-zero emission targets. Swiss Re also called for coordination between the top three carbon emitters (China 28 percent, U.S. 15 percent, India 7 percent), which account for roughly half of all emissions.
“Our analysis shows the benefit of investing in a net-zero economy. For example, adding just 10 percent to the USD 6.3 trillion of annual global infrastructure investments would limit the average temperature increase to below 2°C. This is just a fraction of the loss in global GDP that we face if we don’t take appropriate action,” said Jérôme Haegeli, Swiss Re’s group chief economist, in a statement.
Source: Swiss Re report, “The economics of climate change: no action is not an option”