According to a new analysis of 135 countries, climate change might cost the global economy 4% of its yearly output by 2050, disproportionately affecting the poorer portions of the world.
S&P Global, a credit rating agency that assigns credit ratings to countries depending on their economic health, released a report on Tuesday that looked at the potential impact of rising sea levels, as well as more frequent heat waves, droughts, and storms.
Lower- and lower-middle-income nations are anticipated to suffer 3.6 times larger GDP losses than richer countries under a baseline scenario in which governments generally avoid major new climate change policies, dubbed ‘RCP 4.5’ by experts.
Due to the exposure of Bangladesh, India, Pakistan, and Sri Lanka to wildfires, floods, significant storms, and water shortages, South Asia’s GDP is at danger of 10% -18%, approximately trebling that of North America and ten times that of the least-affected region, Europe.
Central Asia, the Middle East and North Africa, and Sub-Saharan Africa are all expected to suffer significant losses. East Asia and the Pacific are at risk in the same way as Sub-Saharan Africa is, but due to storms and floods rather than heat waves and drought.
“To varying degrees, this is a global concern,” said Roberto Sifon-Arevalo, S&P’s senior government credit analyst. “One thing that stands out is the urgent need for international assistance in many of these (poorer) places of the world.”
Countries near the equator or small islands are more vulnerable, and economies relying on agriculture are more likely to be harmed than those with significant service sectors.
Climate change is already raising exposure and expenses in most countries. Storms, wildfires, and floods alone have cost the world economy roughly 0.3 percent of GDP per year over the last ten years, according to insurance provider Swiss Re.
According to the World Meteorological Organization (WMO), a weather, climate, or water-related disaster has occurred somewhere in the world every day for the past 50 years, resulting in 115 daily deaths and over $202 million in daily losses.
According to S&P’s Sifon-Arevalo, several countries’ credit ratings have previously been downgraded as a result of extreme weather, such as some Caribbean islands following major storms.
However, he stated that the new information would not be incorporated into the firm’s sovereign ratings models since there were still too many unknowns, such as how countries would respond to the changes.
According to a study conducted last year by a collection of UK institutions looking at a more drastic rise in global temperatures, over 60 countries’ ratings could be lowered by 2030 as a result of global warming.
Some experts have also proposed a sliding scale for credit ratings, in which highly-exposed countries would get one credit score for the next 10 years or so and another for when issues are more likely to arise.
“We try to communicate what’s important and where it’s important,” Sifon-Arevalo added. “However, we don’t rate against the worst-case scenario; we rate against the best-case scenario.”