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New report says climate crisis costs $16 million in damages per hour

According to new research published in the science journal Nature Communications, the world’s economies are paying a hefty price in the battle against climate change.

A new study published by two scientists at the Victoria University of Wellington marks the first attempt to quantify the global economic toll directly attributed to human-induced climate change.

Its findings are nothing short of alarming, with the average annual cost from 2000 to 2019 amounting to a staggering $140 billion (£115 billion), with significant variations from year to year.

Going by these figures, the relentless onslaught of extreme weather fuelled by the climate crisis has cost an astounding $16 million (£13 million) every hour. The most recent data from 2022 reveals an even higher cost – $280 billion in climate-related expenses.

To calculate these numbers, the study considers that devastating floods, blistering heatwaves, and unrelenting droughts have not only left land, homes, and local infrastructure damaged or completely ruined – but have also claimed countless human lives.

Even considering all of these factors, it’s likely that the $140 billion per year figure could be much higher as the actual magnitude of the crisis is diminished by a scarcity of data, in particular from low-income countries.

The study also omitted other climate-related costs such as crop yield declines and rising sea levels, but will be a vital starting point for understanding the amount of funding needed for a loss and damage scheme at Cop28 next month.

Let’s take a closer look at the research details.

Calculating the loss of life and land

The authors, Professor Ilan Noy and his colleague Rebecca Newman, adopted a statistical value of $7 million for a lost life, which is an average of the two figures used by the US and UK governments.

This may sound like a contentious approach, but it aligns with standard economic practices and is essential for making decisions about investments in various sectors.

It is also important to factor in human lives, as calculating economic damage to infrastructure alone would disproportionately skew cost estimates toward wealthy countries, despite the fact that extreme weather often impacts poorer nations.

Over the course of two decades, an astonishing 1.2 billion people were affected by extreme weather events linked to the climate crisis, with two-thirds of the financial burden attributed to fatalities. The remaining third arises from the destruction of property and other assets.

Storms account for two-thirds of the climate’s economic toll, while heatwaves contribute 16 percent, and floods and droughts contribute 10 percent.

Thanks to this combined approach, a serious contrast is exposed between the $140 billion in annual damages and the $100 billion proposed for a loss and damage fund created by wealthy countries to aid less affluent nations.

It’s also interesting to note that this figure is well below the massive $7 trillion in annual subsidies enjoyed by the fossil fuel industry.

Why quantify the economic cost of climate change?

Understanding the financial burden of the climate crisis will be a crucial tool for deciding on the amount of money needed to create a global loss and damage fund.

Establishing a loss and damage fund was a key topic discussed at Cop27 last year, with the goal of offering aid to vulnerable nations needing to recover from the aftermath of severe weather events.

Professor Noy emphasises the gravity of his $140 billion annual cost calculation against the disparity with standard climate change cost quantifications based on computer models.

It is now obvious that previous estimates have grossly underestimated the actual economic impact of the climate crisis.

Still, he recognises that his calculations are probably not exact, either. Significant challenges to understanding the true numbers are posed by the lack of data on certain extreme weather events in poorer nations, as well as missing numbers related to human casualties and infrastructure damage.

‘We have no idea how many people died from heatwaves in all of sub-Saharan Africa,’ said Professor Noy. ‘That indicates our headline number of $140 billion is [also] a significant understatement.’

There is no denying existing numbers

The world has witnessed a sevenfold surge in reported losses stemming from extreme weather disasters since the 1970s, according to the World Meteorological Organization.

This study, published in the journal Nature Communications, adopts an innovative approach to gauge the influence of climate change on extreme weather events. Still, the authors recognise the difficulty in separating the influence of global heating from factors such as population growth, urban migration, and improved disaster reporting.

With this in mind, the authors drew from hundreds of studies that assess how global heating increases the frequency of extreme weather events. This allowed for the estimation of the fraction of damages attributable to human-caused heating.

To generate the final estimates, the researchers applied these fractions to the damages recorded in the International Disaster Database, which aggregates data on disasters resulting in at least 10 deaths, 100 affected individuals, or declarations of a state of emergency or international assistance requests.

The central estimate indicates an average annual climate cost of $140 billion, with a range spanning from $60 billion to $230 billion.

What is interesting is that these estimates far surpass those derived from computer models. Computer-generated models rely primarily on notable changes in average global temperature and generally overlook the mounting extremes witnessed around the world.

The years with the highest climate-related costs include 2003, marked by a devastating European heatwave; 2008, marred by Cyclone Nargis in Myanmar; and 2010, stricken by a drought in Somalia and a Russian heatwave.

Property damage peaks at its highest in 2005 and 2017, corresponding to hurricanes that struck the United States in areas where property values are notably high.

Why the numbers are important

During the UN Climate Summit Cop27 in 2022, participating nations agreed to establish a loss and damage fund. This was aimed at helping impoverished nations rebuild in the aftermath of climate-related disasters but has yet to come to fruition.

Professor Noy emphasizes the utility of their methodology in quantifying the necessary funds for this purpose, transforming it into an insurance mechanism for countries. This methodology could also hold significance in determining damages in climate-related legal disputes.

In the eyes of Dr. Stéphane Hallegatte at the World Bank, the key takeaway is clear: climate change is undeniably increasing global economic losses from disasters.

Amidst debates over the significance of climate change, these findings provide a robust and convincing case. They underscore the need for global research centres, predominantly situated in wealthy nations, to refocus their efforts on the challenges faced by poorer countries.

The study is a resounding alarm call to the world, highlighting the urgent need for international collaboration and decisive climate action. As the numbers continue to climb, the cost of inaction is simply too high to ignore.