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Climate Change: What Are the Economic Stakes?

Climate Change: What Are the Economic Stakes?

COP26 climate talks in Glasgow starting next Sunday may be the world’s best last chance to cap global warming at the 1.5-2 degrees Celsius upper limit set out in the 2015 Paris Agreement.

The stakes for the planet are huge – among them the impact on economic livelihoods the world over and the future stability of the global financial system.

Here are 10 climate change-related questions that economic policy-makers are trying to answer:

1) How Much Does Climate Change Cost? From floods and fires to conflict and migration: economic models struggle with the many possible knock-on effects from global warming. The ballpark IMF estimate is that unchecked warming would shave 7% off world output by 2100. The Network for Greening the Financial System (NFGS) group of world central banks puts it even higher – 13%. In a Reuters poll of economists, the median figure for the output loss in that scenario was 18%

2) Where Is The Impact Going To Be Felt Hardest? – Clearly, the developing world. Much of the world’s poor live in the tropical or low-lying regions already suffering climate change fall-out like droughts or rising sea levels. Moreover their countries rarely have the resources to mitigate such damage. The NFGS report projects overall output losses of above 15% for much of Asia and Africa, rising to 20% in the Sahel countries

3) What Does That Mean For Individual Livelihoods? Climate change will drive up to 132 million more people into extreme poverty by 2030, a World Bank paper last year concluded. Factors included lost farming income; lower outdoor labor productivity; rising food prices; increased disease; and economic losses from extreme weather.

4) How Much Will It Cost To Fix It? Advocates of early action say the sooner you start the better. The widely used NiGEM macroeconomic forecast model even suggests an early start would offer small net gains for output thanks to the big investments needed in green infrastructure