The UNSW Institute for Climate Risk & Response (ICRR) has updated its estimate of the extent to which climate change will damage world GDP.

The paper revised an estimate for the impact of rising global temperatures on GDP, warning that a 4% increase in global temperature would slash world GDP by about 40% within 75 years. 

Previous projections estimated that the world GDP would be cut significantly less (11%) by 2100.

In an analysis published this week, academics said they had “fixed” a flaw in the economic model underpinning climate policy, which had not considered interruptions to the global supply chains.

ICRR’s Dr Timothy Neal said the updated model showed a heightened need for faster decarbonisation goals such as limiting global warming to 1.7 °C. This meant being far more ambitious than the 2.7 °C temperature increase cap supported under the old model, he said. 

“Economists have traditionally looked at historical data comparing weather events to economic growth to cost climate damages,” Neal said. 

“In a hotter future, we can expect cascading supply chain disruptions triggered by extreme weather events worldwide.”

Other criticisms leveled at the former modelling include that it inadvertently downplayed how much severe climate change affected the economy, as well as the impact it would have on nations with colder climates such as Russia and Canada. 

Neal said no country was untouched by the effects of climate change, and the readjusted model had “profound implications” for international climate policy and the importance of international commitments like the Paris Agreement.

“We continue learning from how we see climate change impacting our economy right now, from rising food prices to insurance costs, and we need to be responsive to new information if we’re going to act in our best interest,” Neal said. 

“Supply chain dependencies mean no country is immune.”

The peer-reviewed ‘Reconsidering the macroeconomic damage of severe warming’ paper was published in Environmental Research Letters on Monday.

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