Climate Change Risks Could Cost Nations nearly 20% of GDP

September 15, 2009

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While one study shows that climate change risks could cost nations nearly 20 percent of their GDP by 2030, another one indicates that some countries including Mexico and Argentina are leading the way to a low-carbon economy.

Climate change risks could cost nations up to 19 percent of their GDP by 2030, with developing countries most vulnerable, according to a new report from the Economics of Climate Adaptation Working Group. The report also finds that cost-effective adaptation measures already exist that can prevent between 40 and 68 percent of the expected economic loss with even higher levels of prevention possible in highly target geographies.

The report, “Shaping Climate-Resilient Development,” offers a methodology to determine the risks that climate change imposes on economies. By determining a location’s total climate risk and using a cost-benefit analysis to create a list of location-specific measures to adapt to the identified risk, the Working Group was able to evaluate current and potential costs of climate change and how to prevent them.

Climate risk was calculated by combining existing climate risks, climate change and the value of future economic development, according to the report.

The methodology was tested in localities in eight countries: China, United States, Guyana, Mali, United Kingdom, Samoa, India, and Tanzania, which together represent a wide range of climate hazards, economic impacts, and development stages. Click here for the report with test cases.

The test cases were evaluated under three climate change scenarios: today’s climate (assuming that there is no additional impact from climate change); moderate climate change (based on the average forecast of climate change for the particular hazard in the location studied); and high climate change (based on the outer range of the climate change considered possible by 2030).

As an example, in Florida the report estimates an annual expected loss of $33 billion from hurricanes, which is more than 10 percent of GDP under a high climate change scenario.

The findings from the eight case studies indicate that there are cost-effective measures such as improved drainage, sea barriers, and improved building regulations that could reduce potential economic losses from climate change in all regions. The report also shows that the implementation of adaptation measures on average cost less than 50 percent of the economic loss avoided.

Leading up to the G20 summit in Philadelphia in September, where world leaders will discuss ways to finance climate change initiatives and drive the global economy out of a recession, thinktank E3G said Mexico and Argentina are leading a shift to make the global economy more climate friendly, according to an index of carbon competitiveness, reports Reuters.

The report finds that only Mexico and Argentina are improving their output per unit of carbon in line with national emissions trajectories, according to Reuters.

The E3G report, “G20 Low Carbon Competitiveness,” also ranks France, Japan and Britain among the top G20 nations that would be most competitive under carbon limits, by measuring national wealth per unit of carbon emissions, according to Reuters.

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