The price of inaction

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Climate change could cost 5 000 billion dollars. That is as much as the two world wars and The Great Depression of 1929. This estimate made by Nicholas Stern, the former World Bank vice president, came as a bombshell when it was published in a report requested by the British government in 2006. According to the economist, global warming related costs and losses could reach at least 5 % of the world’s yearly Gross Domestic Product (GDP) if no measures are taken. If one takes a larger range of risks and consequences into account, the damage could reach 20% of the GDP.

Annual losses due to flooding alone in a country like the United Kingdom, for example, could go from 0.1% of the GDP today to 0.2% or 0.4%. Another example: the 2003 European heat wave caused 10 billion Euros worth of damage in the agricultural sector and thousands of deaths. Such disastrous occurrences could become frequent by the middle of the century.

By tackling the oncoming climate crisis from an economic point of view and by showing climate-related costs, more and more scientists believe they can make decision-makers listen and act. Another economist, Pavan Sukhdev, is now trying to estimate the costs linked to biodiversity. For example, the destruction of certain forests could change water regimes and reduce agricultural productivity. According to the first estimates, biodiversity losses will cost 100 billion dollars and cause the loss of 27 million jobs by 2030.

According to the Stern report, it is only necessary to spend 1% or 2% of the GDP to avoid global warming. The cost of waiting is therefore 10 to 20 times higher than taking the necessary steps now. Protecting the climate is therefore not only a moral issue but also an economic issue that is in everybody’s best interest.

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