Climate change puts 4% of global GDP at risk, new study estimates

Climate change could cause a 4% loss of annual global economic output by 2050 and disproportionately hit many poorer parts of the world, a new study of 135 countries has estimated.

Rating firm S&P Global, which gives countries credit scores based on the health of their economies, published a report on Tuesday analyzing the likely impact of rising seas and more regular heat waves, droughts and storms.

In a baseline scenario where governments avoid major new climate change policies – known as ‘RCP 4.5’ by scientists – middle- and low-income countries are likely to experience 3.6 times greater gross domestic product losses on average than than the richest.

The exposure of Bangladesh, India, Pakistan and Sri Lanka to wildfires, floods, major storms and also water shortages means that South Asia has 10% to 18% of GDP at risk, roughly three times that of North America and 10 times more than the least affected region, Europe.

The Central Asia, Middle East and North Africa and Sub-Saharan Africa regions also face considerable losses. East Asian and Pacific countries face similar exposure levels to sub-Saharan Africa, but mainly because of storms and floods rather than heat waves and droughts.

“To varying degrees, this is a problem for the world,” said S&P’s top government credit analyst Roberto Sifon-Arevalo. “One thing that really stands out is the need for international support for many of these (poorer) parts of the world.”

Countries around the equator or small islands tend to be most at risk, while economies that are more dependent on sectors such as agriculture are likely to be more affected than those with large service sectors.

For most countries, the exposure and costs of climate change are already increasing. Over the past 10 years, storms, forest fires and floods have caused losses of around 0.3% of GDP annually globally, according to insurance company Swiss Re.

The World Meteorological Organization (WMO) also calculates that, on average, a weather, weather, or water-related disaster has occurred somewhere in the world every day for the past 50 years, causing 115 daily deaths and more than $202 million in losses. daily.

S&P’s Sifon-Arevalo said some countries had already suffered credit rating downgrades due to extreme weather, such as some Caribbean islands following major hurricanes.

But he said the new data is not about to be connected to the company’s sovereign rating models, as there is still a lot of uncertainty about how countries can adapt to the changes.

A study last year by a group of UK universities looking at a more extreme rise in global temperatures predicted that more than 60 countries could see their rankings lowered because of global warming by 2030.

Some experts have also suggested a sliding scale for ratings, where highly exposed countries would have one credit score for the next 10 years or so and another for more in the future, when problems are likely to be scathing.

“We strive to say what is relevant and where,” said Sifon-Arevalo. “But we don’t rank for the worst case, we rank for a base case.”