Climate change could see 4% of annual global economic output lost by 2050 and disproportionately hit many of the world’s poorest regions, according to a new study of 135 countries.
Ratings firm S&P Global, which assigns countries credit ratings based on the health of their economies, released a report on Tuesday examining the likely impact of rising sea levels and heatwaves, droughts and more regular storms.
In a baseline scenario where governments are largely hesitant to adopt major new climate change policies – known as “RCP 4.5” by scientists – lower and lower-middle income countries are likely to experience on average gross domestic product losses 3.6 times greater than wealthier countries.
Bangladesh, India, Pakistan and Sri Lanka’s exposure to wildfires, floods, major storms and water shortages means South Asia has 10-18% of GDP at risk , about three times that of North America and 10 times that of the least affected region, Europe.
The regions of Central Asia, the Middle East and North Africa and Sub-Saharan Africa are also suffering significant losses. Countries in East Asia and the Pacific face levels of exposure similar to those in sub-Saharan Africa, but mainly due to storms and floods rather than heat waves and drought.
“To varying degrees, this is a problem for the world,” said S&P senior government credit analyst Roberto Sifon-Arevalo. “One thing that really stands out is the need for international support for many of these (poorer) parts of the world.”
Countries around the equator or small islands tend to be more at risk, while economies more dependent on sectors such as agriculture are likely to be more affected than those with large service sectors.
For most countries, exposure to climate change and the resulting costs are already increasing. Over the past 10 years, storms, wildfires and floods alone have caused losses of around 0.3% of GDP per year worldwide, according to insurance company Swiss Re.
The World Meteorological Organization (WMO) also calculates that on average, a weather-, climate- or water-related disaster has occurred somewhere in the world every day for the past 50 years, causing 115 daily deaths. and over $202 million in daily losses.
S&P’s Sifon-Arevalo said some countries have already suffered credit rating downgrades due to extreme weather, such as some Caribbean islands after major hurricanes.
But he said the new data was not about to be incorporated into the firm’s sovereign rating models because there were still too many uncertainties such as how countries might adapt to the changes.
A study last year by a group of UK universities looking at a more extreme rise in global temperatures predicted that more than 60 countries could see their ratings drop due to global warming by 2030.
Some experts have also suggested a sliding scale for the ratings, where highly exposed countries would have one credit score for the next 10 years or so and another for later when problems are likely to arise.
“We strive to say what is relevant and where,” Sifon-Arevalo said. “But we’re not evaluating against a worst-case scenario, we’re evaluating against a base-case scenario.”
(Reporting by Marc Jones; editing by Tomasz Janowski)
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