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The Actuary The magazine of the Institute & Faculty of Actuaries

Economic growth not enough to compensate for climate change damage, research shows

Growth in the economy will not be able to counterbalance the damage caused by the effects of climate change, according to a report published by the Potsdam Institute for Climate Impact Research.


Hurricane Katrina © iStock
Financial losses per hurricane could triple by the end of this century if climate change is not mitigated. © iStock

The institute argued this was the case with hurricane damage in the US, when hurricanes like Katrina in 2005 or Sandy in 2012 caused “tremendous damages”.

Researchers at the institute used models to link the storm’s wind speed, the exposed population, per capita GDP to reported losses and newly designed data set for socio-economic and hazard-related predictors. 

They found that financial losses per hurricane could triple by the end of the century if climate change is not mitigated, while annual losses could, on average, increase eight-fold. 

Report author Tobia Geiger explained that so far, historical losses due to tropical cycles were found to increase “less than linearly” with the country’s GDP, however, he added: 

“If you analyse losses with respect to per capita income and population growth separately, this reveals a different picture; our analysis for the US shows that high income does not protect against hurricane losses. 

“As the number and intensity of tropical cyclones is projected to increase under unchecked global warming, by the end of the century average hurricane losses with respect to national GDP could triple.”

Anders Levermann, co-author of the paper, described the hope in economic growth as an answer to climate change as “ill-founded”.

“What if damages grow faster than our economy, what if climate impacts hit faster than we are able to adapt?” he said. 

“While adaptation to unavoidable impacts of global warming is important, climate mitigation remains of vital relevance to prevent or dampen still-avoidable consequences.”