As temperatures rise, GDP will fall
18:18
If we fail to stop the rise in temperatures, the global economy will shrink by several percent in 2050. On the other hand, spending on decarbonization of the economy may increase global GDP, so it should be treated as an investment, not a cost.
This is what the analysts of the Polish Economic Institute (PIE) indicate in the latest report devoted to the economic dimension of green transformation, presented at the World Economic Forum in Davos.
The costs of the green transformation – i.e. transformation of the economy to a non-emission one – will be counted in trillions of dollars. The United States and the European Union alone are expected to spend a total of $20 trillion by 2030 if they want to meet their climate goals.
Withholding investment in the energy transition will result in a much greater economic downturn than incurring these expenses – this is the conclusion drawn by PIE analysts from the collected data.
Additionally, there is more at stake than just avoiding economic losses. Although even estimates of the size of GDP if the Paris Agreement goals are achieved by 2050 point to a likely strong economic slowdown – by about 4.2 percent – the rate of return on investment should also be important for countries and private investors.
If we take into account the positive impact of such investments on GDP, it means that even an increase in spending does not mean an inevitable decrease in GDP. On the contrary, investments of such amounts can add about 0.4 percentage points per year to global economic growth – meaning a GDP 4 percent higher in 2030 than under the current investment path.
