Economists Predict Climate Change Will Melt 3 Percent off Global GDP by 2050

By:
Chris Gaetano
Published Date:
Nov 21, 2019
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The widespread ecological impact of climate change is predicted to bring about widespread economic impacts as well, with economists projecting that, by the year 2050, climate change will have shrunk gross domestic product (GDP) by about 3 percent, like an ice cube in a slowly warming drink, according to MarketWatch

The data, gathered by the Economist Intelligence Unit, shows that the 3 percent is just an average, and that the impacts will vary based on region. Africa, for example, is expected to have a 4.7 percent drop in regional GDP by this time, making it the least resilient against climate change, followed by Latin America, with an expected 3.8 percent drop; the Middle Easy, 3.7 percent; Eastern Europe, 3 percent; the Asia-Pacific region, 2.6 percent; Western Europe, 1.7 percent; and, finally, North America at 1.1 percent. 

The study echoes a number of others that have made the case for climate change action on economic grounds. The Federal Reserve Bank of Richmond, for example, calculated that climate change could cut U.S. economic growth by a third over the next century, and that, overall, a one degree Fahrenheit increase in the average summer temperature reduces growth at the state level by 0.15 to 0.25 percentage points. 

Financial institutions seem to be taking climate change risk seriously, as they are now finding ways to offload it onto consumers. Essentially, banks originate mortgage loans for coastal properties likely to be affected by climate change-related flooding and hurricanes. Since they are private entities, they are able to price this risk into the cost of the loan. When this risk grows, however, they then resell the mortgages to Fanny Mae and Freddy Mac. As taxpayer-supported entities whose mission is to expand home ownership in the United States, they are unable to price in climate risk in the same way as the banks that sold them the mortgages. This has the effect of moving the risk from the bank to the taxpayers.

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