Local weather Change May Minimize World Financial system by $23 Trillion in 2050

WASHINGTON – Rising temperatures are likely to depress global prosperity significantly by 2050 as crop yields decline, disease spreads and rising seas consume coastal cities, a major insurance company warned Thursday, highlighting the consequences if the world doesn’t slow down its fossil fuel use quickly.

According to a report from Swiss Re, one of the world’s largest providers of insurance to other insurance companies, the effects of climate change are likely to reduce global economic output by 11 to 14 percent by 2050 compared to growth without climate change. This corresponds to a worldwide annual economic output of up to 23 trillion US dollars as a result of climate change.

Some Asian nations could have a third less wealth than they would otherwise, the company said. “Our analysis shows the potential cost to economies if governments fail to respond more decisively to the climate,” said Patrick Saner, who is responsible for Swiss Re’s global macroeconomic outlook.

The projections come when world leaders gather in Washington on Thursday and Friday for a virtual climate summit hosted by President Biden, who has urged countries to do more to reduce their greenhouse gas emissions. Mr Biden is expected to commit to cutting United States emissions by about half by 2030.

The new report makes the operations associated with these negotiations clear.

“We are adapting our pricing model for hazards where the confidence in a direct link to global warming is medium / high, such as heat waves, forest fires, droughts and heavy rain,” said Jerome Jean Haegeli, chief economist at Swiss Re, in a statement .

The projections could also affect investments by Swiss Re and other insurance companies, which collectively manage around $ 30 trillion in assets, according to Haegeli.

If countries manage to keep an average global temperature rise less than two degrees Celsius above pre-industrial levels – the goal of the 2015 Paris Agreement, an agreement between nations to combat climate change – economic losses would be by mid-century marginal according to Swiss Re. The company found that most countries’ economies would be no more than 5 percent smaller than they would otherwise be.

However, current emission levels are far from achieving these goals. Global temperatures are expected to rise 2.6 degrees by 2050 based on the current trajectory, Swiss Re reported.

If so, the United States economy would be up to 7 percent smaller than a world without climate change, the report said. Other wealthy Western nations, including Canada, Britain, and France, could lose between 6 and 10 percent of their potential economic output.

Updated

April 23, 2021, 1:13 p.m. ET

For poorer nations, who tend to experience warmer temperatures but are less able to adapt their infrastructure and economies in response, the consequences would be far worse.

Even if the global temperature rise were kept at two degrees Celsius, Malaysia, the Philippines and Thailand would each expect economic growth of 20 percent below what they would otherwise expect by 2050, Swiss Re estimated. At 2.6 degrees, each country would have a third less wealth than usual.

And that’s not the worst case scenario. Swiss Re also modeled the economic impact of a 3.2 degree rise through 2050, which it described as a “major case” for temperature gains.

If so, the prosperity of Malaysia, the Philippines and Thailand would be almost halved compared to a world without climate change. Indonesia’s economy would be 40 percent smaller. India would be 35 percent smaller.

Insurance companies’ growing financial commitment to climate change is already affecting high-risk places.

The United States government this month introduced a new pricing structure for flood insurance, which will mean higher costs for the homes hardest hit by floods. In California, homeowners in areas particularly exposed to forest fires are finding it increasingly difficult to obtain insurance, prompting the efforts of state officials to intervene.

The Biden government is expected to issue an executive order directing insurance regulators to assess climate-related risks for insurance companies.

In the past 40 years, the United States has seen nearly 300 weather and climate-related disasters, each with losses exceeding $ 1 billion, noted Donald L. Griffin, vice president of the American Property Casualty Insurance Association, which represents insurance companies.

There were 22 billion dollar disasters like this in the last year alone.

If climate change continues unabated, the cost of insurance risks in vulnerable areas would become too high. “We can’t just keep building the same way,” said Griffin. “It will make the product less affordable.”

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