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A new study has found that economic models have underestimated how global warming will affect the public’s wealth, with new calculations suggesting the average person will be 40% poorer.
It looks like our current predictions for global warming have underestimated how badly it will affect our personal finances.
A new study by Australian scientists, published in the journal Environmental Research Letters this week, suggests that global GDP per person will be reduced by 16%, even if warming is kept to 2C above pre-industrial levels.
Previous studies were much lower than this figure, only predicting a 1.4% reduction.
Keep in mind too that it is now believed that global temperatures will rise by 2.1C, even if short-term and long-term climate targets are met. Given the lack of tangible momentum toward actual legislative change around the world, even remotely hitting these targets seems very unlikely.
The new research was undertaken by repurposing one of the most popular economic models and enhancing it with climate change forecasts. This was done to capture and consider the impacts of extreme weather events across global supply chains. These types of events are set to occur more regularly as the world heats up.
A report in January from the Institute and Faculty of Actuaries said that previous economic risk assessments had not accounted for real-world climate impacts, including tipping points, extreme events, rising sea levels, migration, and more.
This institute represents the risk management decisions that inform insurers and pension funds.
According to the report, ‘the benign but flawed results may reinforce the narrative that these are slow-moving risks with limited impacts, rather than severe risks requiring immediate action’.
