We are frequently subjected to news detailing the awful consequences of climate change if we don’t prevent it, from cities flooded by melting ice to animal species becoming extinct. Yet it is very rare to see anything about how much flooded cities would damage the economy, and it is even rarer to hear about how much climate change is costing us already. Aside from the odd article describing the cost of the latest natural disaster, people are choosing to ignore the real world costs of climate change. Very few people are willing to recognise the catastrophic economic harm climate change is already inflicting on us, and almost nobody is prepared for how much worse it could get.
The most immediate concern is the increased frequency of extreme weather. The summer of 2018 was the hottest ever in England, and this year we experienced one of the wettest Junes on record. We are experiencing more and more extreme weather events, and with this comes huge cost figures. For example, the 2014 floods in the UK, a result of extreme weather, cost £14 billion, and the so-called ‘Beast from the East’ in 2018 set the country back by £1.2 billion. This isn’t just consigned to the UK either; the 2018 Camp Fire in California caused $16.5 billion of damage and Hurricane Florence, also in 2018, cost $17 billion.
Weather events such as these are happening at an alarming frequency, costing governments huge amounts, yet there is never any large-scale spending which aims to deal with the root cause of these disasters. Billions are spent on aiding those affected, but increased expenditure on fighting climate change never materialises. Politicians are unable, or more likely unwilling, to draw the links between extreme weather and climate change (if they even believe it exists, in some cases), believing that fiscally and politically it makes little sense when there are more immediate concerns for them to address.
One statistic that highlights the harm that climate change is doing at the moment is the social cost of carbon. This is a measure of the economic damage caused by carbon emissions and is currently believed to be at around £30 per ton of carbon dioxide emitted. The average UK carbon footprint is 9 tonnes of CO2 a year, meaning that every year the carbon used by just one person does around £270 worth of damage. However, this is a conservative estimate, with many scientists and economists arguing that the sum should be significantly higher, as the current calculations fail to address the damage to future economic growth.
For now, addressing these events and costs one by one seems to be working, but it is the future that poses the most damaging problems. A recent study highlighted the effects that climate change could have if it is left to wreak its havoc. It shows the percentage loss in GDP per capita by 2100 if countries abide by the Paris agreement versus if there is no action taken. Even if the Paris agreement is abided by, there will only be an increase of 1 or 2% in the GDP of the most developed nations, and many nations including the US, Australia and Japan will experience a small loss of GDP regardless. The most shocking data is that if there is no action taken (which is effectively the current path favoured by most countries), there would be a significant loss of GDP in every country. The UK would lose 5% of its GDP and the US would be even worse off at 10%.
Much of the possible loss of GDP comes from the effects of sea levels rising worldwide, which is predicted to be one of the most costly problems caused by climate change. A study by the UK National Oceanographic Centre predicts that rising sea levels will cost between $14 and $27 trillion by 2100. More than 600 million people live in low lying coastal areas, and if they have to be rehoused it could cost up to 3% of world output.
Climate change could also increase inequality, as the affluent are more likely to have the means to adapt to problems such as rising sea levels. Certain food sources will be decimated; over a half a billion people rely on fish from coral for protein, yet a rise of 2°C would wipe out all coral reefs. Staple foods such as wheat and corn could be affected, with fluctuations in supply caused by droughts. Estimates suggest that for every degree that the world heats up, it will cause a -2% change to labour productivity, and that this will disproportionately affect those living in poorer parts of the world. Other problems such as the desertification of land that was previously used for agriculture and the loss of industries such as tourism are likely to be devastating for those involved.
There appears to be little impetus for finding any sort of practical solution at the moment. Currently we are plummeting headfirst into a vast financial sinkhole, and yet we are not trying to implement a plan to prevent this, with countries simply making vague promises that don’t address how the problem will be solved. Are we going to see a financial crisis caused by climate change? Only time will tell, but if we continue on this course the economic damage caused will almost certainly be devastating.