1126. The Economic Impact of Global Warming

Extreme fluctuations in temperature and precipitation affect production around the world. These production disruptions will be altered by future warming, impacting local and remote consumers throughout the supply chain.

A study published by the Potsdam Institute for Climate Impact Research analyzed how irregular weather events, increasingly intensified by global warming, affect production and consumption by different income groups around the world.

The impact of trade is difficult to quantify because the economic impact can be non-linear. This paper focuses on the direct inequality effects of extreme weather events. The paper simulated the global economic interaction between profit-maximizing companies and welfare-optimizing consumers, and assessed the risks of consumption resulting from weather-induced production disruptions along the supply chain.

The analysis supported previous research that found that the world's poorest are the most at economic risk from climate change. Comparisons between countries show that middle-income countries are at higher risk due to their unfavorable dependence on trade and exposure to seasonal climates. We also know that future climate change will increase risks in most countries. Global warming, on the other hand, ripples through the supply chain, impacting goods and services around the world, increasing consumer risk. It is the high-income consumer segment that faces the greatest increased risk.

Overall, consumers around the world, regardless of their income, will face increasing challenges due to global warming, and without the transition to carbon neutrality, they will ultimately not be able to cope with these challenges. Risks are uneven in terms of income within and across countries, and building targeted regional and global resilience may reduce risks.

Reference
Lennart Quante, Sven N. Willner, Christian Otto, Anders Levermann (2024): Global economic impact of weather variability on the rich and the poor. Nature Sustainability. [DOI: 10.1038/s41893-024-01430-7] https://www.nature.com/articles/s41893-024-01430-7

Contributor: IIYAMA Miyuki, Information Program