New Study: Climate Change Could Reduce The World Economy 19% By 2049

A new study claims that loss of productivity because of climate change could result in a 19% reduction in the world economy by 2049. Despite the number being significantly higher than previous studies, the authors claim their numbers are conservative and could be as high 29% of the global GDP. Climate activists were quick to latch onto the study, calling for more aggressive measures to prevent climate change and fund mitigation efforts.

The study, The economic commitment of climate change, was published in Nature on April 17 by researchers at the Potsdam Institute for Climate Impact Research, also known as PIK, a non-profit organization funded by the German government.

A 2023 study, released at the World Economic Forum, predicted the annual cost of climate change to be between $1.7 trillion and $3.1 trillion per year by 2050. “This includes the cost of damage to infrastructure, property, agriculture, and human health.” That translates to between 1.5% and 2.8% of the current global GDP.

The new study takes a more aggressive approach, calculating the cost of loss productivity in addition to mitigation efforts and damages. Specifically, the study looks at the “impacts of average temperatures on labour and agricultural productivity, of temperature variability on agricultural productivity and health, as well as of precipitation on agricultural productivity, labour outcomes and flood damages.”

The study looked at 1600 regions, using 40 years of comparable data to make calculations. It found that South Asia and Africa were most strongly affected, with Central Asia/ Russia seeing significantly reduced impacts, including possible growth.

“Using an empirical approach that provides a robust lower bound on the persistence of impacts on economic growth, we find that the world economy is committed to an income reduction of 19% within the next 26 years independent of future emission choices (relative to a baseline without climate impacts, likely range of 11–29% accounting for physical climate and empirical uncertainty).”

This equates to $19 trillion to $59 trillion in annual damages by 2049, with a “middle-of-the road” of $38 trillion. For the purposes of the calculations, the researchers tied the value of the dollar to the year 2005. However, it did note that, despite the damages, the income levels still increase relative to today.

While I am not an economist, in my opinion the data seems flawed. According to a study published by NOAA in January 2024, the average temperature has risen 2° F since 1850. In that same period, the global GDP increased from $1.73 trillion to $134.08 trillion. If we accept the climate projection models used in the study, it dismisses the resiliency of human nature and our ability to overcome economic challenges.

Climate advocates also have cause to be skeptical of the data, as it fails to consider the impacts of heatwaves, sea-level rise, tropical cyclones, tipping points, damages to the ecosystem, and human health. The calculations are based solely on increase in temperature and rain.

The claim that climate change will reduce the global economy by 19% will undoubtedly continue to be repeated by climate change advocates. However, given that it is an outlier study, it should be taken with a grain of salt.