- A new study from Deloitte lays out four phases for tackling climate change and its economic risks.
- The team sees climate risks costing the world economy $178 trillion in GDP over the next 50 years.
- Reaching decarbonization can erase that loss and fuel a $43 trillion gain, the economists added.
Letting climate change go unchecked could decimate the global economy by 2070. A new report by Deloitte lays out the four steps that governments, corporations, and citizens need to take if they’re to avoid such catastrophe.
The world has plenty of economic problems on its plate, what with inflation, Russia’s invasion of Ukraine, and broken supply chains all threatening global growth. The looming climate crisis, however, is too costly to ignore, Deloitte economists Pradeep Philip, Claire Ibrahim, and Cedric Hodges said in a report published Monday morning.
If the world stays on its current path, average temperatures will climb 3 degrees Celsius by the end of the century. That will cost the global economy about $178 trillion in just the next 50 years, according to the study. Human costs including food scarcity, job losses, and reduced standards of living will also mount, the team said.
Conversely, pushing for net-zero emissions can set the stage for stronger economic growth in the coming decades. Such a pivot can grow the world economy by $43 trillion by 2070, according to the report.
The deadline for achieving that windfall is fast approaching. Deloitte’s rosier estimate hinges on the world decarbonizing its economy by 2050, a feat that would limit warming to about 1.5 degrees Celsius. But getting to net-zero emissions is no easy task, and Deloitte sees four phases as key to bringing about an environmentally sustainable future.
Going ‘bold’ on climate change
The first steps toward achieving net-zero will be more theoretical than concrete. The world needs to “set the stage” for decarbonization with policies and frameworks for a low-carbon future, the team said, adding that the first step will be focused on “bold climate plays.”
With emissions still on the rise, the clock is running out for world governments to plan for a decarbonized economy.
“Given the costs associated with each tenth of a degree of temperature increase, every month of delay brings greater risk and forestalls the eventual economic gains,” the economists said.
Paying upfront for boosted growth
Reaching net-zero emissions will take some serious investment. Economies will have to pay up for clean energy, sustainable supply chains, and replacements for emissions-intensive industries if they’re to make the transition in time, according to the report.
The shift won’t be without some “growing pains,” the team added. Investing in a greener economy will dent GDP growth over the next two decades as companies shift their focus from profitability to sustainability. Deloitte estimates that the growth outlook will reach a turning point in the late 2040s, after which the investments are forecasted to yield massive returns, to say nothing of the benefits of avoiding climate disasters.
Reaching the turning point
The net-zero experiment will start to pay off in about 25 years, when investments in “structural economic adjustment” near completion, the team said.
“Economies would realize the dividend of the transformation and experience net positive growth,” they added.
The turning point also represents the moment the world moves away from the risk of a $178 trillion projected loss and toward a $43 trillion gain. There will be significant costs in the first several years of the transition, but economists must regard climate change as a trend — not a temporary scenario — as they model the potential risks, according to Deloitte.
“If the economic impacts of a changing climate are left out of economic baselines, the result is likely to be poor decision-making, ineffective risk management, and dangerously inadequate efforts to address the climate crisis,” the team said.
Maintaining a low-emissions future
Staying the path can, ideally, create a decarbonized economy, but the work won’t be all done then. Governments and companies will have to maintain “interconnected, low-carbon systems” to keep the green economy alive and growing, the team said. This world economy will expand “at an increasingly faster rate than its carbon-intensive alternative,” they added.
The benefits will differ from region to region. The Asia Pacific economy has the most exposure to climate-related damage, according to the report. The region could lose $96 trillion of economic growth by 2070 if decarbonization isn’t achieved. Put another way, the area’s GDP could be 9% smaller in 50 years than in a world with net-zero emissions.
The Americas would follow with a combined $36 trillion loss by 2070, Deloitte said. The US alone would lose $4 trillion in potential growth, and the region’s overall GDP would be 4% lower by 2070 compared to a decarbonized world.
Europe faces the smallest projected loss, with the region expected to lose $10 trillion in GDP by 2070 compared to a decarbonized future. Still, economic growth would reach just 1% in the 2060s as climate problems slam into the European economy.
The stakes are extremely high. Deloitte’s modeling shows investments in decarbonization not just paying off, but paying dividends throughout the 21st century.