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Global economy will be 3 percent smaller by 2050 due to lack of climate resilience

The EIU has scored the world’s 82 largest economies on their ability and willingness to confront climate change. The index, which is integrated into our proprietary long-term economic growth framework, makes it possible to assess country-specific economic impacts. The Climate Change Resilience Index rates countries on eight indicators that assess their capacity to withstand the impacts of higher temperatures and more extreme weather events.

The EIU’s research shows that being rich is an advantage, but institutional quality matters, too. Institutional quality is a major determinant of long-run economic growth, but The EIU’s results also point to the importance of institutional quality for minimising the impact of climate change. Poor institutions, therefore, can simultaneously harm economic growth and exacerbate the negative impacts of climate change.

Key figures include:

  • The economy will be 3% smaller in 2050 according a new framework developed by The Economist Intelligence Unit (The EIU).
  • According to The EIU’s framework, Africa is the least resilient region to the impact of climate change (4.7% smaller), followed by Latin America (3.8%), the Middle East (3.7%), Eastern Europe (3%) and the Asia-Pacific (2.6%).
  • North America (1.1% smaller) and Western Europe (1.7%) display the most resilience and are likely to see the least impact economically because both regions are richer and more prepared to tackle climate change from an institutional standpoint. The EIU’s research shows that being rich is an advantage to tackle climate change, but institutional quality matters, too.

John Ferguson, The EIU’s Country Analysis Director, says:

Our index reveals the vulnerabilities that exist in developing countries to the oncoming impacts of climate change. The impacts of climate change are already being felt – we are already seeing the effects of more extreme weather events –, but the economic impacts will only grow over time. It’s important to remember that a 3% loss of real GDP in 2050 is highly significant for the global economy, and that there will be economic losses in every year of the coming three decades.

John Ferguson

There is also uncertainty in forecasting the impacts of climate change. For example, The EIU has assumed that countries make a modest effort to meet their goals as stated in their INDCs (the intended nationally determined contributions as set out for the Paris Climate Agreement). However, the progress in this space and the implementation of these policies could easily disappoint. In fact, the economic impacts could be much worse than those highlighted in The EIU’s model.

Find out more by downloading the Climate Change Resilience white paper now.