(Bloomberg) -- The economic cost of climate change will likely be much more severe than previously feared, as fresh data informs models used to predict the most probable outcomes.
Taking the latest available climate data into account, including record increases in temperatures, “the projected physical risk impact” of climate change on gross domestic product has quadrupled by 2050 in some scenarios, the Network for Greening the Financial System said in a report on Tuesday.
The group also made clear it’s not too late to change course. The “strong negative impacts on GDP could be mitigated by timely transition efforts,” according to NGFS, which represents more than 140 central banks and supervisory authorities.
The warning follows a bleak update by the United Nations Environment Programme, which said last month that the world is now on course for warming of 3.1C above pre-industrial levels, based on current policies. At about 3C of warming, NGFS says its updated model points to GDP losses of roughly 30%.
Even if governments deliver on all the reforms they’ve promised to date, the average temperature may still rise by 2.6C, which is well above the critical threshold of 1.5C, UNEP said. Investment globally would need to climb between $900 billion and $2.1 trillion per year — roughly 1% of the world’s total economic output — to achieve net zero emissions by 2050, according to UNEP.
NGFS says a “substantial economic transformation affecting all sectors of the economy is required,” if net emissions are to be eliminated by mid-century. The fact that efforts to implement climate change policies to date have been slow means governments will need to take a “more ambitious approach going forward,” it said. The lack of timely action also means there’ll now be “higher emissions in the near term and a more disruptive transition than previously anticipated,” it said.
A key lever in forcing down emissions is the price of carbon, which NGFS says remains well below the level at which it needs to be in order to drive real change. A carbon price of about $300 per ton “would be needed by 2035 to incentivize a transition towards net zero by 2050,” NGFS said. That’s $50 higher than the group previously said was required. The difference reflects the delay in reducing greenhouse-gas emissions, which needs stricter policies to meet unchanged climate targets, it said.
In Europe, which is home to the world’s biggest carbon market, one metric ton of carbon currently trades at about €66 ($72), according to data compiled by Bloomberg.
“Limiting the temperature increase to 1.5C above pre-industrial levels in an orderly fashion is achievable, though it will require substantially more efforts,” NGFS said.
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