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Climate change will cost the global economy $38 trillion per year by 2049

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According to a new study, climate change will reduce future global income by about 19% over the next 25 years, compared to a fictional world in which warming does not occur, with the poorest areas and those least vulnerable to warming those responsible for the atmosphere will suffer the greatest financial damage.

According to a study by researchers at the Potsdam Institute for Climate Impact Research published on Wednesday in the journal Nature, the economic impact of climate change on people's income will already amount to around $38 trillion per year by 2049. By 2100, the financial costs could be twice as high as previous studies estimate.

“Our analysis shows that climate change will cause massive economic damage in almost every country in the world over the next 25 years, including highly developed countries such as Germany and the USA with a predicted median income decline of 11% each and France with 13%. “said study co-author Leonie Wenz, climate scientist and economist.

That damage will be compared to a baseline without climate change and then applied to overall expected global gross domestic product growth, said the study's lead author Max Kotz, a climate scientist. So even though it's 19% less globally than it would have been without climate change, incomes will still rise in most places, just not as much because of warmer temperatures.

Over the past dozen years, scientists and others have focused on how extreme weather conditions such as heat waves, floods, droughts and storms have the greatest impact on the climate. However, when it comes to financial impacts, the researchers found that “the overall impact is still primarily due to average warming and overall temperature increases,” Kotz said. It damages crops and hinders labor production, he said.

“These temperature increases are causing the most damage in the future because they are truly the most unprecedented compared to what we have experienced in the past,” Kotz said. According to the U.S. National Oceanic and Atmospheric Administration, the global average temperature was 1.35 degrees Celsius (2.43 degrees Fahrenheit) warmer last year, a record hot year, than in pre-industrial times. Since February 1979, the globe has not had a single month cooler than the 20th century average.

In the United States, southeastern and southwestern states have been hit harder economically than northern ones, with parts of Arizona and New Mexico suffering the greatest financial hit, according to the study. In Europe, southern regions, including parts of Spain and Italy, are more affected than places like Denmark or northern Germany.

Only the areas bordering the Arctic – Canada, Russia, Norway, Finland and Sweden – benefit, Kotz said.

This also means that countries that have historically caused fewer greenhouse gas emissions per person and are least able to adapt financially to warming will also suffer the greatest financial damage, said Kotz.

The study found that the world's poorest countries will suffer 61% greater income losses than the richest.

“It underlies some of the injustice elements of the climate,” Kotz said.

This new study went deeper than previous research, examining 1,600 global areas smaller than countries, taking into account multiple climate factors and examining how long climate-economic shocks last, Kotz said. The study examined the past economic impact on average global domestic product per person and used computer simulations to look into the future to produce detailed calculations.

The study shows that the economic damage over the next 25 years is associated with emissions reductions producing only small changes in income reductions. But two different possible futures are then simulated in the second half of this century, showing that reducing CO2 emissions due to the accumulation of heat-trapping gases is now really paying off, Kotz said.

If the world could curb carbon pollution and initiate a trend that limits warming to 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial times, which is the upper limit of the 2015 Paris Climate Agreement, then the financial damage will remain 20% of global income, said Kotz. But if emissions rise in a worst-case scenario, the financial hit will be closer to 60%, he said.

That shows the public shouldn't think it's a financial “end of the world” and nothing can be done, Kotz said.

Still, it's worse than a 2015 study that predicted a worst-case decline in income of about 25% by the end of the century.

Marshall Burke, the Stanford University climate economist who authored the 2015 study, said the new research's findings that future economic damage is limited and large “make a lot of sense.”

Burke, who was not involved in this study, said he had some problems with some engineering calculations, “so I wouldn't give much weight to their specific numerical estimates, but I think the overall picture is basically correct.”

The conclusions are on the high side compared to other recent studies, but as climate change continues over a longer period of time and the economic damage from higher temperatures becomes greater, they add up to “very large numbers,” the economist and environmental scientist told the University of California Davis professor Frances Moore, who did not participate in the study. That's why combating climate change clearly passes economists' cost-benefit analysis, she said.

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