The world is trying to emerge out of the COVID-19 pandemic that has taken the lives of over 3.8 million people
[1] as of June 21, 2021, and placed millions into extreme poverty. According to World Bank Global Economic Prospects Report June 2021, the COVID-19 pandemic led to an estimated 3.5% contraction in global real GDP. Advanced economies (AEs) contracted by an estimated 4.7% while emerging market and developing economies (EMDEs) suffered an estimated contraction of 1.7% in real terms
[2]. Yet, there is a looming threat to the world economy besides the COVID-19: climate change.
Warmer temperatures, rising sea levels, extreme weather events will devastate the critical infrastructure, adversely affect human health, lower productivity, damage different sectors such as agriculture and tourism, and negatively affect the global economy via disruptions in trade and supply chains. According to the research from Oxfam and the Swiss Re Institute
[3], global temperature rises will adversely impact GDP in all regions by 2050. The current trajectory of temperature increases yields global warming of 2°C to 2.6°C until 2050. Under this scenario, loss to global GDP could be as much as 10% higher than if the Paris Agreement of much less than 2°C is achieved. Under the severe case scenario of a 3.2°C increase in global temperatures wherein no action is taken to combat climate change, the global economy could lose up to 14% than If the Paris Agreement targets are met. Moreover, the economies of Southeast Asian Nations (ASEAN) would be the worst hit. Under the current trajectory, the loss to the GDP of ASEAN member states could be as much as 25% higher than that under the Paris Agreement targets and that loss could reach up to 33% under the severe case scenario of 3.2°C increase in global temperatures.
Achieving the Paris Agreement target of keeping global temperature increases well below 2°C seems to be the optimal outcome as up to 10% global GDP loss could be prevented. Ultimately, the message is a clear one: “no action is not an option”.
Research Assistant Hakan KURT
