There is a strong case for investing in climate mitigation and adaptation based on the severe economic consequences of failure alone. A new report from the Boston Consulting Group, Cambridge Judge Business School, and the University of Cambridge, titled Too Hot to Think Straight, Too Cold to Panic: Landing the Economic Case for Climate Action with Decision Makers, finds that allowing warming to reach 3 degrees Celsius by 2100 could reduce cumulative economic output by 15 percent to 34 percent.

Alternatively, investing 1 percent to 2 percent in mitigation and adaptation would limit warming to 2 degrees Celsius, reducing economic damages to 2 percent to 4 percent, according to the findings. This net cost of inaction is equivalent to 11 percent to 27 percent of cumulative GDP and equivalent to three times global health care spending, or eight times the amount needed to lift the world above the global poverty line by 2100, according to the report.

“Research on climate change impacts across all regions and sectors is expanding rapidly,” said Kamiar Mohaddes, an associate professor in economics and policy at Cambridge Judge Business School and director of the University of Cambridge climaTRACES Lab. “What stands out is that productivity loss—not merely capital destruction—is the primary driver of economic damage. It is also clear that climate change will reduce income in all countries and across all sectors, affecting industries ranging from transport to manufacturing and retail, not only agriculture and other sectors commonly associated with nature.”

The report noted that mitigation is the most cost-effective means of reducing the economic damages of climate change; it can return as much as 5 to 14 times the original investment. At the same time, adaptation is critical to minimizing damages, particularly in the next couple of decades. To limit global warming to 2 degrees Celsius by 2100, mitigation investments must increase ninefold and adaptation thirteen-fold by 2050. The challenge lies in the timing of climate investments, 60 percent must be committed before 2050, while 95 percent of the economic damage from inaction would occur after that point, the report said.

“The economic case for climate action is clear, yet not broadly known and understood,” said Annika Zawadzki, BCG managing director and partner, and a co-author of the report. “Investment in both mitigation and adaptation could bring a return of around tenfold by 2100.”