Climate change: global economy is at risk of drastic collapse

Climate change: global economy is at risk of drastic collapse

According to a new study by the Potsdam Institute for Climate Impact Research (PIK), the global economy could shrink by around a fifth by the middle of the century. Even if drastic measures were taken to reduce climate-damaging gases, there would be significant economic losses of around $38 trillion per year. This damage would be six times higher than the estimated costs of climate protection measures to limit global warming to below two degrees.

The study shows that regions of the world are affected to different extents by the effects of climate change. In particular, poorer countries that have contributed the least to global warming could suffer the most serious damage. For countries like Germany or the USA, the researchers predict an economic decline of around 11 percent by the middle of the century compared to a scenario without climate impacts.

Losses in North America and Europe, as well as South Asia and Africa, could be significant as various economic impacts of climate change, such as crop yields, labor productivity and infrastructure, are affected. It should be noted that the calculations do not take into account damage from extreme weather events such as storms or wildfires, which could further increase projected economic losses.

Researchers analyzed data from over 1,600 regions over the past 40 years to understand how extreme weather events have affected economic growth and how these impacts might continue over the next 26 years. It is noted that the expected damage is due to the greenhouse gases already emitted, and therefore urgent adaptation measures and an immediate drastic reduction in CO₂ emissions are required to minimize economic losses.