In mid-July 2021, one of the most terrible flood disasters in the history of Germany occurred: the water flows caused tremendous damage, especially on the Ahr in North Rhine-Westphalia. More than 130 people died, thousands are still homeless, hundreds of buildings were torn down. In addition to a lot of suffering for those affected and their families, the event meant a lot of economic damage, estimates amount to tens of billions of dollars. The construction fund of the federal government amounts to 30 billion euros.
Shortly afterwards, climate change was held responsible for the catastrophe. This cannot be proven with certainty for a single event, but the fact is that with increasing average temperature, the frequency of extreme weather experiences increases. The question arises as to what effects can be expected from an economic point of view - and how you can contain it if necessary. It is not for nothing that the "Global Risk Report" commissioned by the World Economic Forum 2020 rated climate change as the greatest threat to global economy: According to the latest estimates, economic performance could decrease by 37 percent worldwide by the end of the century - which is more than double the decline during would correspond to the global economic crisis in 1929.
Extreme weather is becoming increasingly frequent.
To do this, you have to estimate the costs of the damage caused. The immediate material losses from environmental disasters can be measured quite well. Hurricane Katrina, who passed the east coast of the United States in 2005, cost the equivalent of around 130 billion euros; The cost of the European heat wave in summer 2003, which, among other things, caused harvest failures, amounted to around 13 billion euros, while the Elbe water cost around 10 billion euros in 2002. Enormous sums, even for rich countries - but the real price is even higher.
Extreme weather such as heat waves and floods endanger agricultural businesses and cattle breeding. In the Midwest of the United States, extreme rainfalls have increased by around 37 percent since 1950. Between 1970 and 1979, around 711 was recorded worldwide, the damage of which was estimated at the equivalent of 150 billion euros - from 2000 to 2009 there were already 3536 such disasters that cost us 800 billion euros.
But these are not the only influences that a changing climate has on the global economy. Warmer weather, for example, is accompanied by a decrease in labor productivity, when the heat makes it impossible to pursue outdoor activities or process certain materials. Low water in rivers can also paralyze production facilities that rely on the cooling liquid, as was the case at BASF in Ludwigshafen in autumn 2018. At the same time, the energy demand for cooling office space and server farms is increasing.
When rivers step over the banks, both factories and the technical infrastructure such as airports, highways and therefore entire cities are threatened. The same applies to coastal regions that are affected by the increase in sea levels, not to mention the destructive power of the hurricanes, which could occur more frequently due to the warmer waters. And last but not least, human health, the ecosystem and thus the biological diversity suffer from the rising temperatures and its effects.
What does the world cost?
While the direct economic damage for material losses, the growing demand for energy and the securing of drinking water can be at least roughly estimated, it is completely unclear how indirect effects should be measured economically, such as shrinking biodiversity or the health consequences for humans. Moreover, these expenditures depend heavily on the extent of climate change: will the temperature increase by two degrees or by five degrees over the course of the century? Will sea levels rise by one meter or more? And what are the consequences?
These are questions that have not yet been answered with sufficient accuracy. Depending on how much greenhouse gases we will further emit in the future, there are various scenarios that themselves, even with uncertainties. Researchers agree on one point: The average temperature will continue to increase - how much depends on our actions, whereby all measures with which another increase is to be stated in again cost money.
Until now, economists have assumed that the global economic damage caused by climate change is likely to cost the world between 1.5 and 10 percent of its economic output by the end of the century. But a study published in September 2021 by Jarmo S. Kikstra and his team paints a completely different picture: Depending on the severity of climate change, it could devour between 6 and 51 percent of global gross domestic product by 2100, with an average of 37 percent.
Unlike in previous work, they took into account that the environmental disasters can also have long -term effects on the economy of a country. Because states of fatal events are not always recovering quickly, sometimes comprehensive measures are necessary that are still cost for decades. The fluctuations in the forecast values illustrate how many uncertainties quantitative economic predictions have been proven. However, it is undisputed that all models predict a slump in global global economy.
The bill is paid by the others
As the models prove, the worst effects of global warming will not affect the USA or Europe, but countries in the global south. On the one hand, this is due to their geographical location and the associated climatic conditions. Because it is often very warm and dry there, and their economy often depends on agricultural production. On the other hand, the poorer countries lack the money to prepare themselves against the expected economic effects of climate warming or to adapt to the changed conditions.
For this reason, at the UN Climate Change Conference in Copenhagen in 2009, the industrialised countries committed themselves to transferring at least 100 billion US dollars annually to developing countries from 2020 onwards, around half of which was for adaptation measures. So far, the states have not kept their promise. At best, this sum is sufficient to cover the grossest damage. By 2030, the amount needed for adaptation measures is likely to climb to 140 to 300 billion US dollars, the United Nations estimates.
Even if Germany gets the effects of climate change less strongly compared to other regions on earth, it will be affected by the networked trade relationships. This is the conclusion of researchers in a study published in 2020 that the Federal Environment Agency commissioned. The experts should estimate what consequences the climate change will have on the German economy and which measures and the federal government would have to take to alleviate possible damage.
Repercussions for Germany
The researchers came to the conclusion that the German import sector will be more affected than the export sector. The most important trading partners are above all other European nations and the United States, which will probably be less affected by the effects of climate change. But there is also importing number one China, which is susceptible to consequences of climate change, especially in regions with important production locations.
In 2015, trade with those twelve countries that are particularly threatened by climate change accounted for around five percent of Germany's import-export business, which is about 50 billion euros for exports and just as much for imports. Above all, Brazil, India, South Africa, Vietnam and Thailand are among these countries. For example, raw materials such as coffee beans come from there, of which the Federal Republic processes and exports more than any other country. For example, the German economy obtains hard disks from Thailand.
What effects the failure of supply chains can have is currently more aware of the world than ever. The corona crisis affects a number of raw materials and technical devices due to disused ports and factories of delivery bottlenecks. Climate change could increase such problems in the future. Therefore, the experts advise German companies to examine their trade braids and diversify as far as possible. The Federal Republic should obtain more imports from European and North American countries or Turkey and at the same time support adaptation and protective measures in vulnerable countries.
A study published in October 2021 makes it clear that the last point is crucial. As the researchers led by Kilian Kuhla from the Potsdam Institute for Climate Impact Research discovered, the effects of supply failures not only add up, but could escalate and thus cause much more damage than previously assumed. "When different weather extremes overlap, the economic losses in the entire interconnected global economy are on average 20 percent higher than the losses from the individual events combined," explains Kuhla. Large economies such as China are particularly hard hit. The researchers arrived at their results by simulating 1.8 million economic relationships between more than 7,000 regional economic sectors with computer assistance.
Compared to other countries, Germany not only has a geographical advantage, but also an industrialist. By exporting climate -friendly technologies such as low -emission systems or electromobility as well as damage to damage techniques, the Federal Republic could even grow in some economic sectors. Therefore, it is all the more important to continue to invest in innovation and new technologies.
Not only for Germany, but also for other countries, it is therefore high time to take forward-looking measures. Direct implementations such as raising dikes or deepening wells are necessary. But the further development of early warning systems can also be extremely helpful. This is particularly evident in the fact that although the number of extreme weather events has more than quadrupled in the last 70 years, the total number of fatalities has nevertheless fallen.
However, all of these measures only fight the symptoms - and are useless if you do not take the cause. It is crucial to limit the further warming of our planet as much as possible. This is only possible with great financial effort, but compared to the costs of a warming, it is always good business.
