Get more Mail & Guardian
Subscribe or Login

Climate change will hit G7 economies harder than Covid, research finds

Economies of the G7 nations could see an average loss of 8.5% of total economic value a year by 2050 if leaders do not take more ambitious action to tackle climate change, according to research.

Oxfam analysed recent research by the Swiss Re Institute to show that G7 nations stand to experience double the GDP losses than those of the Covid-19 pandemic, which caused the G7 economies to shrink by an average of 4.2%. 

“While economies are expected to bounce back from the short-term effects of the pandemic, the effects of climate change will be seen every year,” Oxfam notes.

The Swiss Re Institute research shows that the world stands to lose almost 10% of total economic value by 2050 if climate targets are not met. In the worst-case scenario, global GDP could shrink by 14% by 2050. 

If the Paris Agreement target of well below 2°C warming is met, the anticipated mid-century global GDP loss could be prevented, according to the research. 

Oxfam released its analysis of the research ahead of the meeting of the G7 countries this week. During the summit, leaders of the G7 countries — the UK, the US, Japan, Canada, France, Germany, Italy — will discuss matters of global importance, including Covid-19 recovery and climate change.

Climate change affects economies systemically through physical and transition risks. Physical risks are caused by damage to property resulting from extreme weather events linked to climate change. Transition risks reflect the global move towards less carbon-intensive activities and the effect this could have on economies that fail to keep up.

According to the Swiss Re Institute research, the effects of climate change on economies will accelerate and accumulate over time.

The economic effects of climate change will happen in two phases, the research notes. First, countries will maintain similar GDP growth rates as in the past and emerging economies will continue to catch up with advanced markets. But with temperatures slowly rising, the economic effects will start to become more noticeable, especially in more exposed regions. 

A second phase of slowdown in real GDP would start from about 2050, with the effect in terms of reduced economic growth becoming more pronounced in the second half of the century, according to the research. 

“With the possibility of tipping points being triggered, such as the melting of ice caps or biosphere collapses, leading to irreversible change in climate systems, the tail risks of catastrophic economic impacts would become even more pronounced towards the end of the century or later.”

The Swiss Re Institute research suggests that many advanced economies in the northern hemisphere are least vulnerable to the overall effects of climate change, being both less exposed to the associated risks and having better resources to cope. The US, Canada and Germany are among the top 10 least vulnerable. 

The Swiss Re Institute’s climate economics index ranks South Africa among the most vulnerable economies, with a score of 28.4. Finland is the least vulnerable, with an overall index of 11.3; Indonesia is ranked the most exposed economy, with an index of 39.2. 

South Africa is particularly exposed to transition risks because of the high carbon intensity of many domestically produced goods. 

The country’s financial institutions that have invested in, or lent to, industries exposed to transition risks could incur losses if global demand for these goods declines sharply. The government is also exposed to a large share of transition risks, considering its high investments in state-owned coal-fired power plants and rail facilities designed to transport fossil fuels.

Subscribe for R500/year

Thanks for enjoying the Mail & Guardian, we’re proud of our 36 year history, throughout which we have delivered to readers the most important, unbiased stories in South Africa. Good journalism costs, though, and right from our very first edition we’ve relied on reader subscriptions to protect our independence.

Digital subscribers get access to all of our award-winning journalism, including premium features, as well as exclusive events, newsletters, webinars and the cryptic crossword. Click here to find out how to join them and get a 57% discount in your first year.

Sarah Smit
Sarah Smit
Sarah Smit is a general news reporter at the Mail & Guardian. She covers topics relating to labour, corruption and the law.

Related stories

WELCOME TO YOUR M&G

If you’re reading this, you clearly have great taste

If you haven’t already, you can subscribe to the Mail & Guardian for less than the cost of a cup of coffee a week, and get more great reads.

Already a subscriber? Sign in here

Advertising

Subscribers only

Court judgment about alien fish is about more than trout...

Judge finds that public participation in democratic processes is not the exclusive preserve of the privileged few who have access to the internet and can read English

Marikana victims mull complaint against Judge Lamont after civil case...

Judge Colin Lamont withdrew from the case because of his shares in the mining company Sibanye

More top stories

Court judgment about alien fish is about more than trout...

Judge finds that public participation in democratic processes is not the exclusive preserve of the privileged few who have access to the internet and can read English

Matric exam timetable changes to accommodate elections

Moving the national senior certificate exams forward also allows matrics who are old enough to cast their ballots on 1 November

Duarte threatens to remove North West’s Chauke from interim provincial...

The ANC deputy secretary general wants the national executive committee members in the province to assess the suitability of the IPC coordinator

The R15.3-million Limpopo ‘shack’ tender was earned fraudulently – SIU

The SIU is trying to recover R2.5-million from a housing tender as part of its investigation into corruption during the Covid-19 state of disaster
Advertising

press releases

Loading latest Press Releases…
×