Fighting climate change will help economic growth, study finds

Snow is seen at the old glacier after a monument was unveiled at site of Okjokull, Iceland's first glacier lost to climate change, on Aug 18, 2019.
Snow is seen at the old glacier after a monument was unveiled at site of Okjokull, Iceland's first glacier lost to climate change, on Aug 18, 2019.PHOTO: AFP

ZURICH (BLOOMBERG) - Slowing the pace of climate change in line with the Paris Agreement has clear economic benefits as global warming is increasingly seen as a risk to financial stability and the economy.

Abiding by the Paris Agreement and limiting annual average temperature increases to 0.01 degree Celsius reduces global income by 1.07 per cent by 2100. That compares with a 7.22 per cent hit to gross domestic product if the temperature rises by 0.04 degree Celsius a year, according to a National Bureau of Economic Research paper. The NBER is a private US non-profit research organisation.

Bank of England Governor Mark Carney has been at the forefront of a push by central bank officials to build awareness about the potential losses for companies and economies as global temperatures rise, making storms more powerful and the weather less predictable. Officials are also calling for funding for green finance.

In a sign of what's at stake, a report by the Network for Greening the Financial System included a finding, attributed to Munich Re, showing that annual costs for natural disasters topped the 30-year average of US$140 billion (S$194 billion) in seven of the past 10 years - and that the number of extreme weather events since 1980 has tripled.

The authors, including Matthew Kahn of the University of Southern California and Jui-Chung Yang of National Tsing Hua University, used data from 174 countries for the period 1960 to 2014 and found that per-capita output suffered by persistent changes in temperature.

"In contrast to most of the literature, we illustrated that these negative long-run growth effects are universal, that is they affect all countries, rich or poor, and hot or cold," they wrote.