Climate change could inflict damage of $69 trillion on the global economy by the end of this century if we assume that global temperatures hit the 2C threshold limit to show its most terrible effects, predicts Moody’s Analytics, a consulting firm.
Even reaching the 1.5 degrees Celsius, or 2.7 degrees Fahrenheit of global temperatures that was seen by scientists mostly as a climate-stabilizing limit, yet would cause damage of $54 trillion by the year 2100 as per a report by Moody’s, cited from the Intergovernmental Panel on Climate Change.
Crossing the two-degree threshold “could hit tipping points for even larger and irreversible warming feedback loops such as permanent summer ice melt in the Arctic Ocean,” the firm warns.
The Moody’s report predicts that rise in temperatures will “universally hurt worker health and productivity” and that more frequent extreme weather events “will increasingly disrupt and damage critical infrastructure and property.”
Mark Zandi, the chief economist of Moody’s Analytics said, the report was “the first stab at trying to quantify what the macroeconomic consequences might be” of climate change, written while responding to Central banks and European commercial banks.
According to Zandi, climate change is “not a cliff event. It’s not a shock to the economy. It’s more like a corrosive.” However, he added, it’s one that is “getting weightier with each passing year.”
While weighing the financial health of companies and municipalities, the climate will be taken into account as already said by Moody’s Investors Service, a major credit ratings agency.
The new report highlights the harm that is done to human health, labor productivity, crop yields, and tourism.
It says that “water- and vector-borne diseases such as malaria and dengue fever will likely be the largest direct effect of changes in human health and the associated productivity loss.”
As per the report mosquitoes, fleas and ticks would move to new areas because of the rising temperatures resulting in more sick days. It would also increase the public as well as private spending on health care.
Labor productivity, especially among outdoor workers, including the workers working in agriculture, will suffer the damage.
Some of the fastest-growing economies like China, India, South Africa, Brazil, and Russia, will be affected severely, the report says.
As per the forecasts of the Moody’s Analytics report, oil and natural gas demand will be lower, which will hit oil-exporting countries, especially in the Middle East. It also forecasts that GDP of Saudi will drop 10 percent and more by 2048 and it would be the most harmed kingdom by climate change, hurting the revenue of the government, Moody’s says.
There were drops in GDP in Saudi Arabia when highly cyclical oil prices sink, however, the kingdom would suffer more harm for an extended period as a result of climate change, says Moody’s.
India will be the hardest-hit out of the 12 largest economies where GDP is growing slow by 2.5 percentage points and more only because of the effects of climate change, the report says. The heat stress will hit the service industry of the country, agricultural productivity will fall, and healthcare costs will increase.
The different scenarios were carried out by the firm based on an international study by the World Bank, considering different locations and weighing varied economic sectors. It mentioned that coastal real estate would suffer from rising sea levels as it would wipe out rental incomes in some areas, and consumer spending will also be reduced.
However, the scenarios only go through 2048. Moody’s report says “the distress compounds over time and is far more severe in the second half of the century.”
“That’s why it is so hard to get people focused on this issue and get a comprehensive policy response,” Zandi said. “Business is focused on the next year, or five years out.”
He added: “Most of the models go out 30 years, but, really, the damage to the economy is in the next half-century, and we haven’t developed the tools to look out that far.”
Some businesses are peering ahead on climate change, too.
One of the biggest insurance firms in the US, Chubb, said on Monday that it is not going to sell insurance any more to new coal-fired power plants or sell new policies to companies earning 30 percent and more of their revenue from the mining of coal used in power plants.
A dozen and more leading insurance companies in Europe have already cut off insurance for coal companies, but U.S. firms are resisting the pressure for taking climate change into account.
Chubb’s exemplary step was just the beginning. “A major U.S. insurer like Chubb restricting insurance for coal projects and companies is a game-changer,” said Ross Hammond, a senior strategist for the Insure Our Future campaign that is trying to pressurize insurance companies to pull out of the coal market. However, the company still needs to stop insuring new coal mines and the oil sands, or tar sands, in northern Alberta, Hammond said.
Lindsey Allen, executive director of Rainforest Action Network, said that “new coal projects cannot be built without insurance, and Chubb just dealt a blow to the dozens of companies that are still betting on the expansion of coal globally.”
A report, separately written by the chief economist of Equinor, the Norwegian oil company earlier known as Statoil, captured the three scenarios for climate change and its impact on global economies, mainly on energy.
The report said, only one of those would lead to a sustainable path, which also comes with enormous challenges. Reaching that set of targets by 2050 requires, “almost all use of coal to be eradicated,” oil demand needed to be reduced to half, and natural gas demand should be cut by 10 percent and more. There should be a sharp increase in renewables as well as carbon capture and storage or utilization supported by the continuous advancement of technology.
Eirik Waerness, senior vice president and chief economist of Equinor, said, “In order to hit 1.5 degrees Celsius, the model to get there is enormously challenging.” According to him half of the new cars and even more would have to run on electricity by 2030. The wind and solar would equal the total current output of electricity, leaping from current levels even in case the demand for electricity doubles.
The temperature of 1.5 degree Celsius is the threshold target set by most climate scientists to avoid dire climate change.
While deciding regarding financing new energy projects, the company currently assumes a carbon price of $55 a ton, Waerness said. That is why Equinor has been investing in projects like offshore wind more to gain experience with offshore technology and platforms.