BAKU, Azerbaijan, March 12. Allowing the global average temperature to rise by 3°C by 2100, rather than limiting it to below 2°C, could reduce cumulative economic output by 15% to 34%, Trend reports with reference to the outlook prepared by the Boston Consulting Group, University of Cambridge climaTRACES Lab and Cambridge Judge Business School.
“We have compared three scenarios to assess the economic damage of climate change:
- The baseline scenario assumes no further economic damage from climate change, nor further adaptation needs. This scenario is counterfactual and does not account for real-world climate impacts.
- In the best-case scenario—the rise in the global average temperature is below 2°C by 2100—GDP growth is estimated to decelerate by 0.02% per year relative to the baseline scenario. This results in an unavoidable cumulative GDP loss of up to 4%.
- In the alternative scenario—the global average rises by 3°C by 2100—GDP growth would lose 0.56% per year relative to the baseline. This results in a cumulative economic output loss of 15% to 34%. This scenario reflects avoidable losses compared with the Parisaligned case,” reads the report.
The outlook says that there are several reasons to believe that climate change will cause more severe economic damages—and sooner— than the current 3°C trajectory:
- Climate change would occur faster than expected if climate sensitivity is underestimated (for example, if the temperature is affected by greenhouse gases more than expected) and tail risks materialize (such as unlikely but catastrophic events). For example, there is a 10% risk that the global average temperature could increase by 6°C by 2100.
- Current models are not sophisticated enough to capture the compounding economic damages of climate change at higher temperatures or account for spillover effects across countries and regions, according to a 2019 IPCC special report. For example, climate disruptions in a major food-producing region could cause price shocks in other regions, resource shortages, and even political unrest.
- Current models do not holistically include climate tipping points and feedback loops. Some tipping points activate feedback mechanisms that amplify climate changes. Also, they can be interconnected—crossing one increases the likelihood of triggering others.