Climate Change Costs the World 12% in GDP Losses for Every 1°C of Warming, Report Says

A new report on the macroeconomic effects of climate change has estimated that these damages are as much as six times larger than previous estimates. According to the report, each 1 degree Celsius increase in global temperature can be linked to a 12% decline in global gross domestic product (GDP).

The report, “The Macroeconomic Impact of Climate Change: Global vs. Local Temperature,” is a working paper by the National Bureau of Economic Research (NBER). It found that the “Social Cost of Carbon” could be around $1,056 per ton of carbon dioxide emissions. 

The findings are much higher than previous estimates; the Interagency Working Group estimated the cost to be about $51 per metric ton, while the U.S. Environmental Protection Agency (EPA) estimated $190 per metric ton of carbon emissions, E&E News reported.

According to Statista projections, the amount of global carbon emissions for 2023 was about 37.55 billion metric tons.

Further, the new NBER report found that if the world continues at a business-as-usual warming scenario, it could lead to a welfare loss of about 31%, emphasizing the economic importance of reducing emissions.

“There will still be some economic growth happening but by the end of the century people may well be 50% poorer than they would’ve been if it wasn’t for climate change,” said Adrien Bilal, co-author of the report and an economist at Harvard, as reported by The Guardian. “I think everyone could imagine what they would do with an income that is twice as large as it is now. It would change people’s lives.”

According to NASA, the world has already experienced about 1.36 degrees Celsius in warming as of 2023 when compared to the pre-industrial average global temperature from 1850 to 1900. In February 2024, a controversial study was released that predicted the world has already surpassed 1.5 degrees Celsius warming, the target outlined in the Paris Agreement to curb the worst impacts of climate change. 

In a poll by The Guardian published earlier this month, hundreds of top climate scientists from around the world indicated that they expected global warming to reach at least 2.5 degrees Celsius by the end of the century.

Even if the world does keep warming to the 1.5 degree Celsius limit, the global GDP could still decrease by about 15%, the report found.

“That is still substantial,” Bilal told The Guardian. “The economy may keep growing but less than it would because of climate change. It will be a slow-moving phenomenon, although the impacts will be felt acutely when they hit.”