It’s no longer breaking news that the costs of climate change will add up quickly as extreme weather linked to global warming leads to one costly disaster after another. But, nonetheless, on occasion it makes sense to pause and take stock, and this week offered two research items that remind me of how those will stack up.
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The first is an April 15 report from the National Ocean and Atmospheric Administration (NOAA) that warns that coral reefs are undergoing a fourth “global bleaching event.” Bleaching—when corals lose their color—is a sign that corals are unhealthy and can result from a range of strains, including polluted water. But the primary driver these days is the warmer waters that have resulted from climate change. While bleached corals are still alive, they are much more vulnerable to disease and much more likely to die. Right now, reefs in the Atlantic, Pacific and Indian Oceans are all experiencing bleaching; many reefs face a truly existential threat.
The state of reefs is a great example of the surprising economic ripple effects of climate change—and those effects are bound to hit a wide range of firms. Most obviously, reefs drive some $36 billion in tourism across the globe, according to data from the Global Coral Reef Monitoring Network. But that’s just the start. Reefs can reduce wave energy, protecting coastal cities from the high cost of flooding. They support marine fisheries that in turn support food production. And researchers see marine ecosystems as a potential source of new medical treatments, including for cancer.
Add this all up and there’s a lot of economic value at stake—trillions annually, according to some measures. If you run a hotel near the Great Barrier Reef, the threat is obvious. But big firms in everything from pharmaceuticals to consumer goods may be wise to look at the unexpected ways their value chains may be wrapped up in reefs.
As significant as it is, the economic damage caused by the destruction of coral reefs is just one small piece of a much bigger picture of how climate will shape the economy. Another study published Wednesday in the journal Nature brings this idea home. The world has already baked in climate-related losses of $38 trillion per year by the middle of the century, according to the study. That means that average income per capita across the globe will be 19% lower than in a world without climate impacts. And while the poorest regions are hit the hardest, the impacts occur across the globe.
Getting to such numbers requires a range of assumptions, and the authors don’t pretend that theirs are perfect. But anyone who would like to see the global economy continue to grow should take note of how the economic costs of climate change are stacking up. Moreover, as those costs continue to rise, companies will increasingly need to adjust their strategies for a much different economic landscape. The mid-century impacts, forecast in so much climate research now, aren’t that far away.
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