October 27, 2023 climate

2023 set another record in temperatures. How will the climate crisis impact the economy?

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The 1.5°C warming threshold has been breached for a record number of days in 2023.

According to a BBC analysis, the global temperature was at least 1.5°C higher than before the industrial revolution for a third of all days in 2023.

The EU climate service reported this year’s September was the warmest on record – temperatures were 0.5°C higher than in 2020, and 0.93°C higher than the average for September between 1991-2020.

The main reasons for record-breaking temperatures are emissions of greenhouse gases and El Niño, a climate pattern describing the warming of the Pacific Ocean.

The US Climate Prediction Centre warned that El Niño will remain active at least until the first quarter of 2024, further preventing the world from cooling down.

The 1.5°C mark has been set out in the Paris Agreement, an international convention adopted in 2015 by the United Nations Climate Change Conference (COP21). The goal of the convention was to limit global warming to ‘well below 2°C above pre-industrial levels’ and limit it to 1.5°C by cutting emissions 43% by 2030.

Analysis: How climate change affects the economy

According to the US National Oceanic and Atmospheric Administration, the United States experienced a record 22 weather and climate-related disasters in 2020, with total damages exceeding $95 billion.

Climate change does not only affect the economy when disasters occur – it impacts the economic wellbeing of people around the world through hard-to-perceive destruction of infrastructure, disruption of global supply chains, and the effect on agriculture.

The UN Food and Agriculture Organization estimates that the gross value of global agricultural production in 2020 was just above $5 trillion.

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Climate change will impact every aspect of farming – it causes fluctuations in the length of vegetation, renders species of plants impossible to be cultivated in certain regions and disrupts the global water distribution mechanisms.

The Intergovernmental Panel on Climate Change estimates that global crop yields could decline by up to 25% by 2050, which could limit the global economy’s growth by $1.25 trillion.

For example, changing monsoon patterns have already led to reduced crop yields in India. In 2020, the New Delhi-based Center for Science and Environment estimated that Indian farmers lost an average of 7,000-9,000 INR (95-125 USD) per hectare due to climate change-induced weather events.

The UK can be an example how climate change induces costs through infrastructure. In 2022, the BBC reported on a major road that was closed ‘after the surface buckled in the heat’. Most UK roads soften at 50°C, making the surface sticky and more susceptible to pressure loads.

Howard Robinson, chief executive of UK’s Road Surface Treatments Association estimates that less than 5% of British roads are made of materials that could endure climate change in the long run.

As of now, the UK spends £20.7 billion on infrastructure annually, a figure likely to increase to accommodate climate change induced.

However, it is important to note that, according to an analysis from the London School of Economics, ‘investment in green industries and infrastructure is expected to provide a boost of 2.8% of GDP’ by the end of the century.

Written by:

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Nadia Diakowska

Economics Correspondent

Warsaw, Poland

Born in 2005, Nadia is a graduate of Stefan Batory High School in Warsaw, currently taking a gap year to complete A-levels.

Her main interests include economics, mathematics and psychology. In the future, Nadia plans to study economics and management in the UK.

Edited by:

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Sofia Radysh

Science Section Editor

Animal welfare correspondent

Kyiv, Ukraine | London, United Kingdom

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