The economic ramifications of climate change could see the global economy shrink 7 percent by the end of the century if we allow greenhouse gas emissions to continue business-as-usual.
What's more, according to a study published on Monday by the National Bureau of Economic Research, "rich" countries like the US and Canada could fare even worse – losing more than 10 percent of their GDP within the same timeframe. This turns previously held assumptions that the burden of climate change will fall on poorer nations with warmer climates on its head.
While the study has to make certain assumptions (for example, how societies adapt to changing climates), the basic verdict seems to be that all countries (rich or poor, hot or cold) will feel the tough economic consequences of climate change, caused by rising temperatures, extreme weather events, etcetera – and the more the new climate strays from its historic norm, the more severe those economic effects will be.
"Whether cold snaps or heat waves, droughts, floods or natural disasters, all deviations of climate conditions from their historical norms have adverse economic effects," Kamiar Mohaddes, a co-author of the study from Cambridge University's Faculty of Economics, said in a statement.
"Without mitigation and adaptation policies, many countries are likely to experience sustained temperature increases relative to historical norms and suffer major income losses as a result. This holds for both rich and poor countries as well as hot and cold regions."
Mohaddes and co. came to this conclusion after analyzing data from 174 countries between 1960 and 2014, determining the relationship (if any) between above-norm temperatures and income levels. The results were then plugged into a model that predicted the income effects of climate change – first, if nothing is done to abate greenhouse gas emissions and second, if we stick to the goals laid out in the Paris Agreement.
Under the former scenario, average global temperatures are expected to climb 4°C (7.2°F) by the end of the century but the toll of the temperature increase will vary country by country. Japan, India, and New Zealand, for example, will lose 10 percent of their income, while the UK loses 4 percent.
"The UK recently had its hottest day on record," said Mohaddes. "Train tracks buckled, roads melted, and thousands were stranded because it was out of the norm. Such events take an economic toll, and will only become more frequent and severe without policies to address the threats of climate change."
While some have predicted that cooler countries like Canada could actually benefit from global warming, the results here suggest otherwise. Indeed, Canucks can expect to lose 13 percent of their income by the end of the century.
"Canada is warming up twice as fast as the rest of the world," said Mohaddes. "There are risks to its physical infrastructure, coastal and northern communities, human health and wellness, ecosystems and fisheries – all of which has a cost."
Meanwhile, the US is on track to lose 10.5 percent of its GDP.
However – there's hope. If the Paris Agreement is stuck to and greenhouse gases drastically curtailed, GDP loss will equate to roughly 1 percent across the board (or rather, the globe).
"The economics of climate change stretch far beyond the impact on growing crops," said Mohaddes. "Heavy rainfall prevents mountain access for mining and affects commodity prices. Cold snaps raise heating bills and high street spending drops. Heat waves cause transport networks to shut down. All these things add up.
"The idea that rich, temperate nations are economically immune to climate change, or could even double and triple their wealth as a result, just seems implausible."
To avoid major economic damage, he added, "the Paris Agreement is a good start".