New study finds that climate change is threatening 4% of global GDP

Soldiers of the Army evacuate people from flood areas to safer places when Cyclone Yaas, an Indian cyclone, makes landfall at Ramnagar (Purba Medinipur) district in the eastern State of West Bengal, India, May 26, 2020. REUTERS/Rupak De Chowdhuri/File Photo

LONDON (Reuters), April 27th, 2017 – Climate change could lead to a loss of 4% of global annual economic output by 2050 and impact many poorer areas of the globe more severely, a study of 135 countries suggests.

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

In a baseline scenario in which governments are reluctant to adopt major climate change policies (known as ‘RCP4.5’ by scientists), lower-income countries will likely experience 3.6 times more gross domestic product losses than those with higher incomes.

South Asia’s vulnerability to floods, wildfires and major storms means that Bangladesh, India, Pakistan, and Sri Lanka are at risk. Its GDP is roughly 10%-18% higher than North America, and 10 times greater than Europe.

Sub-Saharan Africa, Central Asia, and the Middle East all suffer significant losses. Sub-Saharan Africa’s exposure to East Asia and the Pacific countries is similar, but mainly because of floods and storms, rather than heat waves and drought.

“To different degrees, this is an issue for the world,” said S&P’s top government credit analyst, Roberto Sifon-Arevalo. “One thing that really jumps is the need for international assistance for many (poorer parts) of the world.”

Countries near the equator and small islands are more at-risk, while economies that rely on agricultural sectors more than those that rely on large service sectors are more likely to be affected.

The cost of climate change is increasing for most countries. According to Swiss Re, losses from storms, wildfires and floods have risen by around 0.3% per year over the past 10 years.

The World Meteorological Organization, (WMO), also estimates that every day since 1950, there has been a weather-, climate-, or water-related disaster in the world. This has resulted in 115 deaths and more than $202 million in daily losses.

S&P’s Sifon-Arevalo said that some countries have already suffered credit ratings downgrades due to extreme weather, such as some Caribbean Islands after major hurricanes.

However, he stated that the new data was not going to be plugged into the firm’s sovereign ratings models because there were still too much uncertainty about how countries might adapt.

A StudyA group of UK universities, looking at the effects of global warming on global temperatures, predicted that by 2030 over 60 countries will see their ratings fall.

Experts also suggested a sliding scale of ratings. Countries that are highly exposed would have one credit score for the next ten years and another for later in the future, when there is more risk.

Sifon-Arevalo stated, “We try to tell what is relevant” “But we don’t rate to the worst-case scenario, but we rate to the base-case scenario.”

Marc Jones Reporting
Editing by Tomasz Januaryowski

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