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A new report by the IFoA warns the global economy could face 50% loss in gross domestic product due to the catastrophic impacts of climate change.
The numbers pertaining to the climate crisis continue to paint a grave picture. And a new report from the Institute and Faculty of Actuaries (IFoA) is no different. The organisation has posed a stark warning: if the catastrophic effects of global warming continue without intervention, global GDP could shrink by half between 2070 and 2090.
It’s a sobering statistic, particularly for those who have spent recent years burying their head in the proverbial sand. Unchecked carbon emissions lead to intensified weather extremes, weaker ecosystems, and eventually global economic downturn. The choice to do nothing, it turns out, comes with a hefty invoice. It’s one the global economy might struggle to pay.
The IFoA report builds on decades of warnings from scientists and economists. But its predictions are particularly harrowing when it comes to global capital. It calculates that the economic impact of climate-related disasters, combined with diminishing returns of industries reliant on stable ecosystems, will cut global GDP by 50%.
These aren’t just speculative musings. Major economic downfall is the result of a domino effect. Rising temperatures impact crops, which displace millions and drive up prices. Coastal flooding claims major urban centers, fires – like those ravaging Los Angeles – destroy entire communities leading to further displacement, personal and commercial financial loss.
Despite this reality playing out in real-time, the collective response to climate change remains frustratingly incremental. Despite renewable energy targets and carbon offsets, the needle on global emissions is barely moving.
That’s largely because climate action fails to align with short-term incentives, despite its long-term necessity. It’s easier for politicians and CEO’s to push the problem on to the next administration, the next board, the next generation.
Climate change is costly to families, communities, and governments.
If we do nothing, the cost to global GDP would be $178 trillion.
If we hit net-zero by 2050, it will create $43 trillion in added GDP globally.
That’s a $220 trillion swing. pic.twitter.com/m6NDUMBLoi
— Senate Budget Committee (@SenateBudget) March 18, 2024
Sandy Trust, lead author of the report, told the Guardian that financial institutions, politicians, and civil servants were ignorant to the extent of the risk.
‘[They] do not recognise there is a risk of ruin. They are precisely wrong, rather than being roughly right.’
The IFoA’s statistics bring a cold, hard, consequence of inaction to the fore. Unlike rising sea levels and natural disasters, this outcome speaks to the primary motivator of our capitalist society, the same capitalist society that is central to the planetary destruction causing climate change. That motivator is money.
Wildfires, floods, and deadly heat waves might sound more pressing than financial loss. But these outcomes are easy to compartmentalize. It won’t happen ‘to me’, it only happens ‘over there’. This illusion of separation is what prevents actionable responses to the climate crisis.
A global economic crisis, however? That’s slightly harder to distance oneself from.
But while GDP may be a convenient metric for headlines, it doesn’t capture the full scale of the crisis.
Behind the percentage points are human lives – families displaced by rising seas, communities shattered by hurricanes, farmers driven to ruin by prolonged droughts. The economic losses projected by the IFoA may dominate the conversation, but they are, in many ways, an abstraction. The lived experience of climate catastrophe defies quantification.
Tragically, it’s the human element that makes climate issues so pressing. Economies throughout history have recovered from recessions and depressions. But what happens when the bedrock of these economies erodes beyond recognition?
As Trust aptly put it, ‘you can’t have an economy without a society, and a society needs somewhere to live.’
That’s not to say all is lost. I don’t want to be that person disregarding the transformation potential of collective action in favour of scaremongering doom and gloom. The same ingenuity that propelled humanity to industrialize the planet can, in theory, be harnessed to save it.
‘Nature is our foundation,’ says Trust, ‘providing food, water and air, as well as the raw materials and energy that power our economy. Threats to the stability of this foundation are risks to future human prosperity which we must take action to avoid.’
Renewable energy technologies, reforestation initiatives, and sustainable agricultural practices offer pathways to mitigate the worst impacts of climate change. What’s needed is the political will and economic investment to scale these solutions before time runs out.
