New projections by the UNSW Institute for Climate Risk & Response (ICRR) reveal 4°C rise in global temperatures would cut world GDP by around 40 per cent by 2100 – a stark increase from previous estimates of around 11 per cent
The recently published analysis fixes an oversight in the current economic model underpinning global climate policy, toppling previous carbon benchmarks.
The results support limiting global warming to 1.7 °C, which is in line with significantly faster decarbonisation goals like the Paris Agreement, and far lower than the 2.7°C supported under previous models.
Lead researcher, Dr Timothy Neal, said his analysis uses traditional economic frameworks that weigh immediate transition costs against long term climate damages, but refine a key input.
"Economists have traditionally looked at historical data comparing weather events to economic growth to cost climate damages,” he said.
What they fail to account for are interruptions to the global supply chains currently buffering economic shocks.
“In a hotter future, we can expect cascading supply chain disruptions triggered by extreme weather events worldwide,” he warned.
“The economic case for stronger climate change actions is clear.
“Because these damages haven’t been taken into account, prior economic models have inadvertently concluded that even severe climate change wasn't a big problem for the economy – and it’s had profound implications for climate policy.”
The local-only damage models have been used in the economic forecasting that has shaped the major powers’ climate policies and played a crucial role in international agreements.
Dr. Neal said the updated projection should underscore to all nations that they are vulnerable to climate change.
Moreover, the research doesn’t account for climate adaptation, like human migration, which is politically and logistically complex and not yet fully modelled.
“We continue learning from how we see climate change impacting our economy right now, from rising food prices to insurance costs, and we need to be responsive to new information if we’re going to act in our best interest,” he said.