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Climate Models Underestimate Economic Toll
6 Feb
Summary
- Current economic models fail to capture cascading climate failures.
- Extreme weather events cause billions in economic losses annually.
- GDP metrics mask welfare losses, overstating economic resilience.
Current economic models are significantly underestimating the global economic toll of climate change, scientists have warned. A new report highlights that these flawed damage models create a false sense of security as the world continues to heat up.
Lead author Dr. Jesse Abrams stated that economic models underestimate damages because they cannot capture cascading failures and compounding shocks defining climate risk. These risks undermine the very foundations of economic growth.
Financial projections often ignore extreme weather, despite recent events in Europe causing billions in short-term economic losses. A study found heatwaves, droughts, and floods affected a quarter of EU regions, with immediate losses of 0.26 percent of economic output in 2024.
Researchers argue that climate change is not a marginal shock but is reshaping economic structures, altering where people live and what can be produced. This systemic disruption cannot be assessed by models designed for small, reversible shocks.
Furthermore, GDP metrics are too narrow to represent climate damages. They fail to account for mortality, inequality, cultural loss, and ecosystem degradation, masking welfare losses entirely and giving a false sense of resilience.
