Economic models of climate change may have substantially underestimated the costs of continued warming, according to a new study involving UCL researchers.

Published today in the journal Environmental Research Letters, the work by an international team of scientists found that the economic damage could be six times higher by the end of this century than previously estimated.

Projections like this help governments around the world calculate the relative costs and benefits of cutting greenhouse gas emissions. However, prior analysis has shown that the models used may ignore important risks and therefore underestimate the costs.

Currently, most models focus on short-term damage, assuming that climate change has no lasting effect on economic growth, despite growing evidence to the contrary. Extreme events like droughts, fires, heatwaves and storms are likely to cause long-term economic harm because of their impact on health, savings and labor productivity.

The study authors first updated one of the three climate-economy models used to set the price of carbon for national policy decisions, then used it to explore the impact of year-to-year climate variations and the rates of economic recovery after climate events.

The study shows that by 2100, global GDP could be 37% lower than it would be without the impacts of warming, when taking the effects of climate change on economic growth into account. Without accounting for lasting damages—excluded from most estimates—GDP would be around 6% lower, meaning the impacts on growth may increase the economic costs of climate change by a factor of six.

Yet, there is still considerable uncertainty about how much climate damages continue to affect long-term growth and how far societies can adapt to reduce these damages; depending on how much growth is affected, the economic costs of warming this century could be up to 51% of global GDP.

Source: phys.org