The global economy is at risk of a catastrophic crash due to the climate crisis, warn experts. As the world hurtles towards a 2C global temperature rise, the consequences are dire. Current economic models, used by governments and financial institutions, fail to account for the extreme weather disasters and climate tipping points that are rapidly becoming more frequent and severe. These models assume the future will mirror the past, despite the unprecedented burning of fossil fuels pushing the climate system into uncharted territory. The potential for societal collapse looms large, with tipping points like the collapse of Atlantic currents or the Greenland ice sheet posing global threats. The timing of these events is uncertain, but their impact could be devastating. The researchers from the University of Exeter and Carbon Tracker Initiative warn that extreme weather disasters could decimate national economies. The report emphasizes the need for governments, regulators, and financial managers to prioritize these high-impact, low-likelihood risks. Avoiding irreversible outcomes by reducing carbon emissions is far more cost-effective than dealing with the aftermath. Dr. Jesse Abrams highlights the limitations of current models, stating that they fail to capture the cascading failures and compounding shocks that define climate risk in a warming world. This misreading of risks by financial institutions and policymakers could lead to a crisis unlike any other. Mark Campanale, CEO of Carbon Tracker, highlights the complacency among investors and policymakers due to flawed economic advice. The consequences of delay are catastrophic, he warns. Hetal Patel from Phoenix Group underscores the distortion of investment decisions and the underestimation of physical risks, which have real-world consequences for society. Actuaries predict a 50% loss in global GDP between 2070 and 2090 due to climate shocks, a stark reminder of the potential economic devastation. The new report, backed by expert judgments from 68 climate scientists, reveals that societies and markets suffer most from extreme events like heatwaves, floods, and droughts. GDP, the traditional measure of economic health, fails to capture the full cost of climate damage, including deaths, social disruption, and degraded ecosystems. The researchers argue that instead of waiting for perfect models, we should focus on extremes and the vulnerability of the financial system. Investors must accelerate the transition away from fossil fuels to avoid large future losses, as advocated by Campanale. Current models, despite their precision, are deemed wildly optimistic by scientists, with potential 10% GDP losses at 3C-4C degrees of global heating. Laurie Laybourn from the Strategic Climate Risks Initiative highlights the urgency of the situation, warning that regulations and government actions are dangerously out of touch with the reality of the climate-nature crisis.
