David Winter, senior economist at Oxford Economics, explores a report warning that, if current global warming trends continue, heatwaves and erratic temperatures have the potential to reduce global economic output by 20% in 2050.
- Temperature volatility and the incidence of hot weather temperature extremes are rising: the hottest year in the UK in 2022 would be deemed “cool” by the end of the century, according to the Met Office.
- Heatwaves cause crop damage, wildfires, and power outages, they buckle roads and runways and even take lives. Cooler, Northern hemisphere countries are particularly exposed.
- The evidence for potential tipping points suggests that without mitigation that limits global warming, the incremental cost of adaptation measures would rise as exposure to damaging climate events accelerates.
A study by Oxford Economics finds that temperature anomalies from historical norms are highly economically consequential. As global warming rises past 1.1°C, productivity growth falls. In aggregate, 2.2°C of warming by 2050 has the potential to reduce global economic output by 20%. Warming of 5°C would lead to economic annihilation, consistent with scientific research on mass extinction thresholds.
Temperature extremes have become concerningly common
As the planet continues to warm, temperature volatility and the incidence of hot weather temperature extremes are rising too. Despite average global warming levels of approximately 1.1°C, today, regions such as North America and Europe have in recent years been grappling with relentless heatwaves that consistently shatter temperature records by several degrees.
What was once considered a rare occurrence is now concerningly common. Heatwaves or ‘abnormally high’ temperatures, which previously occurred less than 0.1% of the time in a normal climate, now occur around 11% of the time. The hottest year in the UK in 2022 would be deemed ‘cool’ by the end of the century, according to the Met Office.
© Oxford EconomicsClimate change is now a lived experience
As a result of this ongoing change in the climate, millions of people are now witnessing the tangible impacts first-hand. In Canada, wildfires are on track to burn through 7.5 million hectares of timber, with especially hard economic repercussions in Alberta, Quebec, Ontario and British Columbia where mining, quarrying, and oil and gas extraction operations have been forced to shut down.
Europe has been suffering from a worsening drought since 2022, decimating crop yields, while temperatures have soared above 40°C in Italy, Spain, and Greece this summer, leading to evacuations from three major cities. In the Southern US, extreme heat has persisted for three months, posing severe health risks to the unprepared: last Monday, heat alerts were in effect for more than 55 million people.
Severe heatwaves in Asia have pushed temperatures in Siberia above 38°C. Meanwhile, China, which has just experienced a larger number of days exceeding 35°C since records began, faces pressure on its power supply as workers rush to turn on the air conditioning. The repercussions of excessive heat and a damaged electric grid caused rolling blackouts in 2021, pointing to the challenges ahead.
New estimates of future damages are a stark warning
Moving beyond the anecdotal evidence, a recent Oxford Economics study aggregates all of these factors. By using a new methodology that considers the entire distribution of temperatures over a given year, it accounts for the future economic impacts of events such as heatwaves and droughts, as well as periods of volatility, and the steady rise in average annual temperature levels associated with global warming.
The results are sobering and underscore the costs of climate inaction. Based on current trends, 2.2°C of warming by 2050 has the potential to reduce global economic output by 20%. And warming of 5°C would lead to economic annihilation, consistent with scientific research on mass extinction thresholds and tipping points.
While all countries are expected to see significant losses in productivity growth from additional warming, exposure to these damages is not evenly distributed across the world. Cooler, Northern-hemisphere countries are particularly exposed to larger temperature extremes because of their faster warming rate, which puts them at a higher risk of experiencing extreme weather events compared to their historical climate norms.
Adaptation may help offset damages, but only as a complement to climate mitigation efforts
Oxford’s approach assumes no adaptation to climate change. Given that humans have been adapting to their environments throughout history and can be expected to continue doing so, the size of the estimated productivity impacts likely constitutes an upper bound as adaptation would reduce both the estimates of historical and future projected damages.
Over the past few decades, adaptation has played an increasing role in climate policy across all regions. But most adaptation is fragmented, small in scale, sector-specific, designed to respond to current impacts or near-term risks, and focused more on planning rather than implementation. Moreover, financing for adaptation projects is difficult to find.
Each project is highly specific and difficult to generalise when it comes to creating a business case. This in turn makes adaptation projects high risk and prone to maladaptation – actions that increase the vulnerability or exposure to climate-related risks. For example, sea walls to protect against sea level rise can result in water from flooding events and heavy rainfall being trapped in coastal villages and blocked from flowing into the sea.
Source: Climate Central
Adaptation is not a long-run solution in the absence of mitigation, particularly for low-lying countries. The evidence for potential tipping points suggests that without mitigation that limits global warming, the incremental cost of adaptation measures would rise as exposure to damaging climate events accelerates. In fact, for some low-lying countries like Bangladesh, adaptation options will be insufficient to save the vast majority of land around its current coastline, with floodings extending deep into the inland for a sea level rise of one metre – even more so for a possibly higher sea level rise of around two metres by 2100.
Therefore, to minimise the adverse effects of climate change most effectively, future policy will require large, rapid, and coordinated adaptation measures coupled with strong mitigation that stabilises global temperature and ensures that adaptation does not become impossibly expensive.
The opinions of guest authors are their own and do not necessarily represent those of SG Voice.
