What Is the Economic Cost of Climate Change?

Climate change is not just a disaster for the planet’s environment. It will also cause massive economic disruption. 

There are several ways that climate change will affect the economy. Job loss, reduced food production, and a high allocation of spending on repairs from extreme weather events are a few examples.

Unless we act now, these events could depress our economy. At SmartSolar, we can help you find climate change solutions like solar panels so that you can do your part to counter the economic costs of climate change.

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What Are the Economic Costs of Climate Change?

According to experts, climate change will cause considerable damage to the global economy in the future. However, it's important to remember that these damages are already happening. For example, it is suggested that between 2016 and 2018, climate change disasters cost about $650 million.

Let’s explore the present-day and future costs of climate change to the economy.

Future Costs of Climate Change on the Economy

Some factors we need to consider here are the impact of food production caused by climate change. Current estimates suggest growth in agricultural yields could drop by around 30% by 2050. The global food market is estimated to be just below $10 trillion per year. Any decline in production would be very costly.

Businesses will be severely affected by climate change. Some studies suggest at least 22 sectors will be hit by global warming, depending on different models. Temperatures of 4.5˚ C over pre-industrial levels could cost the US economy $520 billion annually.

The Swiss Re Institute suggests that if temperatures rise by 3.2°C above pre-industrial levels in 2050, a shocking 18% of global GDP will disappear. The paper also states that climate change is such a significant systemic risk that moving to a low-carbon economy is our only option.

Who Will be Hit Hardest by Climate Change Economic Costs?

How climate change affects economies is complex. The Western world will bear the brunt of the costs of infrastructure spending. According to a report in Nature, India and the US will lose the most if we don't take urgent action.

What Sectors of the US Economy are Vulernable to Climate Change Costs?

A comprehensive report by the Columbia Climate School outlines how different economic sectors will fare due to climate change.

Some of the areas it includes are:

• Agriculture: Climate change will hit agriculture hard. While it only accounts for a small percentage of US economic activity, fires, floods, and rain could have a devastating effect.
• Tourism: If winter snow keeps melting, it will cost the Us tourism industry around $2 billion annually.
• Financial Markets: The financial markets will be hurt if commodities and raw materials are hit by drought. For example, water drought will increase production costs, rendering some products totally obsolete.
• Tech: Rising temperatures will increase the costs of data storage. 

What Are the Economic Cost Projections of Climate Change?

Climate change economic cost projects are essential. They help governments and policymakers make better decisions about countering global warming. However, recent studies have predicted bad news.

A study published in Environmental Research Letters in 2021 suggested previous forecasts have seriously underestimated the economic costs of climate change. The paper states that without action by 2100, GDP could be 37% less than without global warming.

According to the study, without climate change, economic forecasts for global GDP should be around 6%. That's six times higher than we previously thought.

How Much Will Combating Climate Change Cost

Combating climate change will also involve investment. However, experts suggest that this spending will be a net positive.

Reaching the UN's Sustainable Development Goals in compliance with the Paris agreement will cost almost $7 trillion, according to the Organisation for Economic Co-operation and Development (OECD). These forecasts include innovations, resets, and replacing existing infrastructure.

The World Bank put the costs of financing climate action by 2030 at about $90 trillion. However, they suggest that each dollar invested could yield about a $4 return. This process includes replacing coal with solar panels and other sustainable and green energy sources.

What is clear, and has been for a long time, is that the costs of inaction will be far more severe. Add on top the costs of human and animal suffering that climate change solutions can reduce, and it's an open and closed case.

How Can We Reduce the Economic Costs of Climate Change?

Reducing the economic costs of climate change starts with addressing problems with fossil fuels. These energy sources release carbon monoxide into the atmosphere, causing global warming.

One way to counter these issues is to switch to solar panels. These sustainable energy sources can reduce dependence on fossil fuels and save money. Government incentives like solar panel tax credits in Florida can help you invest in a better future for future generations.

Final Thoughts

A lot of coverage about climate change rightfully focuses on the risks of death and destruction of our environment. However, we should also consider the economic costs. 

Both ignoring and dealing with climate change will cost money. Without action, economies and production will be destroyed. However, addressing climate change issues will require significant investment in infrastructure to replace energy sources and reduce global warming.

Offset some of these costs with government incentives. If you want to learn more about the benefits of federal solar panel tax credits and how to find the best solar companies near you.

Still not sure about the benefits of solar panels? 

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