$200b economic damage from extreme weather: Report
36 countries ranked in terms of economic losses from climate change
A recent report highlights that extreme weather events are inflicting widespread devastation on the global economy, resulting in significant losses estimated at $200 billion annually.
This includes disruptions to flights, property damage, loss of life, and interruptions to economic activity, underscoring the profound impact of such events.
This assessment, conducted by Zurich-based reinsurance company Swiss Re in its latest report titled “Changing climates: the heat is (still) on,” identifies floods, tropical cyclones, winter storms (in the Nothern Hemisphere), severe thunderstorms, and record forest fires as the primary culprits behind these economic losses.
Countries ranked
The report ranked 36 countries based on the vulnerability of their economies to the intensifying climate crisis.
It highlights the Philippines and the US as among the most economically exposed nations, facing annual economic losses equivalent to 3 per cent ($12 billion) and 0.38 per cent ($97 billion) of their GDP, respectively.
Intensification
Moreover, both countries are expected to experience further intensification of weather hazards in the future, signaling a potential increase in climate-related economic losses in the years to come.
The top countries most exposed to these weather perils also include Thailand, Austria, China, India, Australia, Switzerland, and Japan.
These countries face significant financial risks from hazard intensification, the report stated, particularly due to the lag in establishing loss mitigation and adaptation measures compared to the rate of economic growth.
The report underscores the urgency of taking adaptation measures to mitigate the impacts of climate change and foster insurability. More importantly, it highlights the need for greater investment in building resilient infrastructure.
2023: Hottest year on record
Jérôme Jean Haegeli, Swiss Re's Group Chief Economist, emphasises the importance of risk reduction through adaptation, particularly in light of the hottest year on record in 2023, marked by a global average temperature 1.45°C higher than pre-industrial levels.
This risse in average global temperature also poses risks and threats to human health, food security, water availability, biodiversity, and economic development, the report stated.
“Climate change is leading to more severe weather events, resulting in increasing impact on economies. Therefore, it becomes even more crucial to take adaptation measures,” said Haegeli, who argued that “insurability” greatly improves by reducing risk through adaptation.
Coping
To cope with the impacts and uncertainties of climate change, countries are racing to reduce their vulnerability. Despite the increasing recognition of the need for climate adaptation, progress remains slow, especially in low-income countries historically most affected by climate change.
Challenges such as financing, technology, knowledge gaps, and conflicts with other goals hinder adaptation efforts.
The report stated that understanding the real economic costs of climate risks can drive the conversation and spur action towards effective adaptation strategies to safeguard economies and communities from the impacts of climate change.
Knock-on effects
Another report, published in January 2024 by the Carnegie Endowment for International Peace, also highlighted the effects of climate change on average temperatures.
• The researchers predicted that “in the coming decades the number of people at risk from extremes will very likely grow, and extreme weather will likely increase.”
• Currently the most comprehensive loss databases are held by insurance companies and are not publicly available.
• The researchers, however, said an open source, peer-reviewed database would enable to scientific community to study worldwide disasters and their knock knock on effect on the economy.
Temperature has been found to affect income via agricultural yields, the physical and cognitive performance of workers, demand for energy, as well as the incidence of crime, unrest, and conflict.
In September, estimates from the National Oceanic and Atmospheric Administration (NOAA) revealed that the US encountered $23 billion natural disasters during the initial nine months of 2023, accumulating costs surpassing $57 billion.
The preceding year (2022) marked America’s third-costliest year for climate disasters – witnessing a total of 18 significant climate-related events that accrued damages totaling $165 billion and resulted in the loss of 474 lives.
Gaps
“In general, countries with sizeable insurance protection gaps and where the establishment of loss mitigation and adaptation measures lags the rate of economic growth, are most financially at risk from hazard intensification,” Swiss Re’s report states.
This encompasses rapidly-expanding economies such as China, Thailand, India, and the Philippines.
However, developed nations including Austria, Australia, Switzerland, Japan, Poland, and the Czech Republic are also included in the list.
Of these, the Czech Republic and Poland are thought to be at the highest risk of experiencing escalating damages from floods through the middle of the century.
In India, climate change is anticipated to exacerbate health issues, particularly malnutrition and child stunting, according to the World Bank. Child stunting is forecasted to rise by 35 per cent by 2050 compared to a climate-stable scenario, disproportionately impacting the poor.
The escalation in temperatures and sea levels is known to amplify the intensity and devastation caused by hurricanes.
A report from the European Environment Agency points to Europe's worsening flood crisis. The assessment reveals a staggering increase in flood occurrences since 1980. Over 3,500 floods have occurred, with the trend showing an alarming rise.
Floods, hurricanes, forest fires
The report forecasts a five-fold surge in flood damage by 2050, with climate change playing a significant role. The escalation of extreme weather, attributed largely to climate change, is believed to have fueled the unprecedented rainfall witnessed in the UK and mainland Europe.
In North America, Morgan Stanley reports that climate disasters have incurred a staggering cost of $415 billion from 2016 to 2018, primarily attributed to wildfires and hurricanes. Hurricane Harvey in 2017 inflicted estimated losses of $125 billion on Texas.
According to climatologist Radley Horton, associate research professor at Lamont-Doherty Earth Observatory, advancements in science provide more precise spatial information, enabling the identification of assets and operations vulnerable to climate change impacts, such as buildings susceptible to inundation due to rising sea levels.
Adaptation measures
A Nature report from 2019 explored climate change's potential impact on 22 economic sectors under different scenarios.
The research used a modeling framework to forecast the impact of climate change on various US sectors, including human health, infrastructure, and agriculture.
The findings reveal intricate patterns of projected changes, with some sectors facing damages estimated in the hundreds of billions of dollars annually by the century's end under high emissions scenarios. If global temperatures rise 2.8˚C by 2100, the study estimated annual costs of $520 billion to the US economy. A 4.5˚C increase would see even higher costs.
The study underscores that no region is exempt from a combination of adverse impacts, and underscores the urgency of emissions reduction and adaptation measures in mitigating economic losses and fostering resilience.
Ways countries cope with climate change:
Mitigation
Implementing measures to reduce greenhouse gas emissions, such as transitioning to renewable energy sources, improving energy efficiency, and implementing carbon pricing mechanisms.
Adaptation
Developing strategies to adapt to the impacts of climate change, including building resilient infrastructure, implementing sustainable land-use practices, and creating early warning systems for extreme weather events.
International cooperation
Collaborating with other nations to address climate change through agreements like the Paris Agreement, sharing best practices, and providing support to vulnerable countries.
Sustainability push
Integrating climate considerations into national development plans to promote sustainable economic growth, preserve ecosystems, and protect vulnerable communities.
Public Awareness and Education: Raising awareness about climate change impacts and solutions among the public, promoting sustainable lifestyle choices, and fostering climate literacy to empower individuals and communities to take action.
A Nature study used a modeling framework to forecast the impact of climate change on 22 sectors in the US, including human health, infrastructure, and agriculture. The findings reveal intricate patterns of projected changes nationwide, with some sectors facing damages estimated in the hundreds of billions of dollars annually by the century's end under high emissions scenarios. The study underscores that no regions are exempt from a combination of adverse impacts, emphasizing the urgency of emissions reduction and adaptation measures in mitigating economic losses and fostering resilience.