A collection of central banks around the globe, including Australia’s Reserve Bank have warned of the unprecedented economic damage if climate issues aren’t addressed.
Known as the Network for Greening the Financial System, the assembly of 60 banks around the world have warned that global GDP could drop by a remarkable 25% by the end of the century if global warming remains unchecked by government action and climate policies.
Experts have forecasted a drop to net-zero emissions by 2070 would give the globe a 67% chance of limiting global warming to two-degrees celsius above pre-industrial levels. This would result in a mere 4% drop in GDP, in comparison to the 25% forecasted if it remains unchecked.
Chairman of the Network for Greening the Financial System, Frank Elderson, has said that “climate change leads to financial risks and therefore remains a vital issue for central banks and supervisors to address.”
To assess the potential damage, the group assessed three possible scenarios: an ‘olderly scenario’, in which climate policies are introduced in a short period of time. These policies would eventually be tightened, to encourage climate-friendly means of production, and would see the world’s GDP drop by 4%.
The second scenario, known as the ‘disorderly’ option modelled the economic damage of not introducing climate policies until 2030. This model would see the world’s GDP drop by 10%.
The third and final ‘hot house’ scenario modelled a world that sticks to current climate policies, which would eventuate in a 3-degree jump in temperatures globally. The long-term impact of this scenario predicts extreme rises in sea levels, societal damage from climate change migration and conflict, and would hit the economy’s GDP figures by 25%.
“As a result, damages in this scenario will be larger than models suggest, particularly in regions with lower resilience and capacity for adaptation,” the network wrote.
The findings will form part of APRA’s climate risk variability assessment that was initially slated for release in September, but will now be delayed due to the coronavirus.
Last week, the Australian Energy Council called on the government to adopt a net-zero target for emissions by the middle of the century. The AEC represents major energy suppliers, and joins calls from the Central Banks mentioned here in their calls for an environmental target.
Chief executive of the Investor Group on Climate Change, Emma Herd, has said that in order to transition, Australia needs a commitment, backed by a long-term policy framework that prioritises environmentally sustainable growth.
“The alternative is sitting on our hands which will continue to expose Australia to decarbonisation efforts across the world while not gaining access to new opportunities that will stem from modernising the economy.”
Herd called on the business community to stop ‘cherry picking’ scenarios that would work alongside their business plan, adding that “governments should also apply these climate scenarios for their own policy decisions, including COVID-19 economic recovery efforts, to ensure taxpayer expenditure is not put at risk by locking in support for carbon-intensive activities.”
We reported last week that the Arctic Circle had recorded consecutive record-setting heat waves, prompting alarm from climate scientists and experts that the rate in which the globe is warming has increased dramatically.