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The economic stakes of climate change are huge, and we need to take this seriously

The COP26 climate talks, due to begin next week may end up being the last chance the world has to cap global warming.

Acceleration of global warming 'code red' for humanity
The IPCC report approved by 195 nations shines a harsh spotlight on governments dithering in the face of mounting evidence that climate change is an existential crisis - Copyright AFP/File AMOS GUMULIRA
The IPCC report approved by 195 nations shines a harsh spotlight on governments dithering in the face of mounting evidence that climate change is an existential crisis - Copyright AFP/File AMOS GUMULIRA

A report by the World Meteorological Organization (WMO) showed that global carbon dioxide levels surged to 413.2 parts per million in 2020 – and the COP26 climate talks, due to begin next week may end up being the last chance the world has to cap global warming at 1.5-2 degrees Celsius.

Climate change and extreme weather are incurring real-world costs, even as the risks grow disproportionately in countries around the globe. Here in the United States, from monstrous wildfires and historic drought in the West to extreme rainfall and flooding across the country, the economic costs are already in the billions of dollars.

But besides the financial losses in the U.S., looking at the global loss, the knock-on effects from not capping global warming at 1.5-2 degrees Celsius could be disastrous. And the stakes are huge – among them the impact on economic livelihoods the world over and the future stability of the global financial system.

Record-smashing heatwaves, floods and drought across three continents in recent weeks, all amplified by global warming, — Photo: © AFP/Peter Parks

Looking at the cost of climate change

According to the International Monetary Fund, unchecked global warming would shave 7 percent off the world’s output by 2100. And that’s a low estimate. In a Reuters poll of economists, the median figure for the output loss in that scenario was 18 percent.

The effects of climate change are going to be felt the hardest in the developing world. Much of the world’s poor live in the tropical or low-lying regions already suffering climate change fall-out like droughts or rising sea levels. Moreover, their countries rarely have the resources to mitigate such damage.

What does this mean for poor and undeveloped nations? A big percentage of Asia and Africa will suffer economic losses of 15 to 20 percent or more. To make matters worse, in many countries in Africa, Asia, and the far East, wars, constant internal fighting, drought, and poverty will drive up to 132 million more people into extreme poverty by 2030.

According to NASDAQ, in Berlin, officials from Germany and Canada were set to present a plan about how rich countries can help poorer nations finance the overhaul needed to address climate change. And just so you know – wealthy countries have so far failed to deliver their 2009 pledge to provide $100 billion per year in climate finance to poorer countries by 2020.

Actually, it is difficult to put a price tag on the environmental impact of climate change. Data about industrial output, worker demand, and productivity, inflation, and earnings are all critical inputs in coming up with reliable figures, reports NBC News.

Poorer nations are demanding that richer ones finally make good during COP26 on a decade-old promise to provide $100 billion each year to help them green their grids and adapt to climate change. — © AFP

Insurance companies working to access the risks of climate change

It is not only the economic sector that is affected, the insurance industry has been on the front lines of trying to price the risk not only of natural disasters as they occur but also the long-term ramifications of outcomes like drier farmland and higher water tables over time.

Insurance companies use reams of historical data to build predictive models that have been refined over years or even decades, said Cathy Seifert, an insurance analyst at CFRA Research.

The problem is that today’s environment isn’t behaving like the environment of a generation ago, or even a decade ago, in some cases. “It’s important from a sector perspective and also from a geographic perspective – and the data may not be there,” she said.

Jared Dubrowsky, the vice president of the environmental practice at NFP, an insurance brokerage and consulting company, said, “We’re seeing more indirect things that pop up.”

Risks are emerging in new places. For example, Dubrowsky said, rising sea levels are elevating water tables — along with long-submerged contaminants. “It’s starting to come up. We’re starting to see there may be vapor issues, there may be groundwater issues, and a lot of insurers are starting to get really nervous about that,” he said.

Right now, Pandora’s box could well become a tinderbox, economists warn, if public- and private-sector economists alike are unable to develop data-modeling tools that can accurately reflect climate risk.

And there is a bottom line to all this – All of us, around the world, had better get serious about global warming – because it is not a joke or a piece of fake news. What is happening today is real, and only a concerted effort by everyone will get us through this.

Written By

Karen Graham is Digital Journal's Editor-at-Large for environmental news. Karen's view of what is happening in our world is colored by her love of history and how the past influences events taking place today. Her belief in man's part in the care of the planet and our environment has led her to focus on the need for action in dealing with climate change. It was said by Geoffrey C. Ward, "Journalism is merely history's first draft." Everyone who writes about what is happening today is indeed, writing a small part of our history.

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