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Climate change devours trillions

"Cost to the Earth"

The EU Parliament has just raised the greenhouse gas reduction targets (see: solarify.eu/grosser-erfolg-fuers-klima). “Too little”, say the responsible NGOs anyway. It seems that they are not wrong, because in a sensational new report published on October 5, 2020, the Carbon Disclosure Project (GDP) together with the Energy Institute of University College London (UCL) calculated the potential costs for global gross domestic product (GDP) that arise when we exceed the 2-degree limit. The report calculates the average damage costs of “business as usual” measures against climate change at 4.6 trillion euros per year by 2070 and at 26.4 trillion euros per year by 2200. Taking this damage into account will reduce the GDP growth rate by 10% by 2050 and by 25% by 2100.

The report was commissioned by CDP, a non-profit organization that operates the global environmental data disclosure platform, and co-authored by Gabrial Anandarajah and Olivier Dessens of the UCL Energy Institute and Isabela Butnar and Alvaro Calzadilla Rivera of the UCL Institute for Sustainable Resources.

The results show that the cost of damage caused by climate change will run into many trillions of euros if measures are not taken to reduce greenhouse gas emissions. Taking this damage into account will reduce GDP growth by 10% by 2050 and by 25% by 2100.

Mitigation expenditures offer a cheaper solution that will peak at 6 trillion euros per year by 2050. In contrast, a scenario based on the Paris Accord - in which temperatures are kept 2 ° C above pre-industrial levels - will result in this damage peaking at $ 1.8 trillion / year in 2070.

Although it is increasingly recognized that climate change has a major impact on long-term GDP growth, an important measure of economic health and well-being, attempts to embed climate-related risks into common macroeconomic indicators have been limited. This is in part because the effects of climate change on GDP are difficult to capture due to regional winners and losers and great uncertainties in the modeling approach.

Commissioned by the CDP, the report highlights the importance of mapping the impacts of climate change on GDP with a detailed approach and understanding regional and sectoral differences, with some markets and regions being more vulnerable to climate-related risks. A more detailed approach to farming impact modeling sees significant negative impacts in regions such as India and Africa, while temperate regions are likely to see net benefits.

Gabrial Anandarajah, Associate Professor at UCL Energy Institute, commented: Gabrial Anandarajah - Photo © iris.ucl.ac.uk In assessing the impact of climate change on GDP, we tried to overcome the limitations of a single model by using three different models developed at UCL Energy Institute and UCL Institute for Sustainable Resources. Three global multi-region models were used to estimate the economic and non-economic costs of climate change for different economic sectors ”.

Doubt (doubtful)

Such calculations would be criticized among researchers, according to the portal GodmodeTrader and the Munich Mercury. Above all, the temperature rise to be tolerated, which brings costs and benefits into balance, is by no means undisputed. “This is not the best work these writers have done. They are using three models that don't really go together for purposes for which they were not designed, ”quoted the Frankfurter Allgemeine Zeitung such as the economist Richard Tol from the University of Sussex, and who also worked for the Intergovernmental Panel on Climate Change *). It is doubtful whether the report will advance the scientific debate. Nevertheless, the figures show a trend that should make those responsible in politics and business sit up and take notice.

*) What the gazettes to conceal, or not to know (want to): Richard Tol left the IPCC six years ago and is now on the climate denier side. He believes measures against greenhouse gases in Ireland are economically harmful and considers the negative effects of climate change to be overrated. Tol took part in projects of the Copenhagen Consensus several times and is one of the critics of the Stern Report (see: de.wikipedia.org/Richard_Tol)

Key results of the GDP

Impact assessment based on damage costs from the PAGE model:

  • The PAGE model shows that the effects of climate change can reduce the global GDP growth rate if the feedback mechanism is introduced - in both scenarios by 10% in 2050 from 2.7% to 2.5%. This growth rate is maintained in the 2 ° C scenario, while in the reference scenario the growth rate is reduced by a further 25% until 2100.
  • Annual damage costs evaluated in the PAGE model show that the mean damage costs in the business-as-usual reference scenario are US $ 31, 17 times the level of the 2 ° C scenario. USD 2 trillion per year at the end of the simulation period compared to annual peak damage of USD 1.8 trillion per year in the 2 ° C scenario.
  • It is important that the damage costs are at the 2 ° C peak of 1.8 trillion USD by 2075 and thereafter on the plateau, while in the reference scenario the costs reach three times this level (5.4 trillion USD) and rise steeply from 2100 onwards.
  • To achieve these lower damage costs, PAGE estimates the steeply rising damage mitigation costs in the 2 ° C scenario, which will peak in 2050, at around USD 7 trillion / year.
  • Under a 2 ° C scenario, the damage costs from rising sea levels contribute the largest part of the total damage costs, while in the reference scenario the other costs - economic and non-economic - grow faster beyond 2060.
  • It is important that the reference scenario also sees the risk of increasing discontinuity costs - these are costs that are non-linear and irreversible and are triggered by events such as the melting of the ice sheets when temperatures exceed a threshold value of 3.5 ° C.
  • Based on the probability distribution of the damage costs, both scenarios show a skew in the direction of higher costs that are derived directly from economic and non-economic costs, while the costs associated with sea level rise are more normally distributed.
  • In the reference scenario, damage costs based on GDP per capita increase from 0.5% to 2% in 2050 to 3% to 7% in 2100, with developed countries having the highest impact due to their higher GDP.

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