New report uncovers unforeseen factor driving economic hardship: 'Expanding rapidly'

The shifting climate could take a major toll on the global economy if drastic action is not taken to mitigate its impacts, according to a new report. 

What is the economic impact of climate inaction?

According to research by the University of Cambridge climaTRACES Lab and Boston Consulting Group, if global average surface temperatures increase by 5.4 degrees Fahrenheit (three degrees Celsius) by 2100, economic productivity could decline by 15% to 34%. 

But, investing just 1% to 2% of global GDP in climate mitigation and adaptation by 2100 would keep warming below 3.6 degrees Fahrenheit (two degrees Celsius), protecting the world from some of the most severe consequences of global heating. 

Curbing pollution — a primary driver of rising temperatures — and increasing our resilience against extreme weather events could reduce economic impacts by 2% to 4%. 

The cost of doing nothing would equal 11% to 27% of cumulative GDP, which is "equivalent to three times global healthcare spending, or eight times the amount needed to lift the world above the global poverty line by 2100," according to the report. 

Why does climate inaction matter?

The report clearly shows that even if addressing the shifting climate is expensive, it's far costlier to ignore the consequences. Rising temperatures, prolonged droughts, and severe flooding have already resulted in significant crop losses for farmers worldwide. 

One report found that children born today will pay a hefty toll if humanity doesn't act quickly to limit warming. Researchers found that a child born in 2024 could face lifetime costs of between $500,000 and $1 million due to reduced earnings and cost-of-living increases. 

Aside from the economic impacts of climate inaction, it also poses serious risks to human safety and security. Without spending more to address the shifting climate, humans will be exposed to increasingly frequent and severe storms, heat waves, and other disasters. 

While extreme weather will still be a factor even if society invests in adaptation measures, humanity will be in a much better position to face these risks if they have a climate-proof home equipped with solar panels and backup batteries, for example. On a global scale, ramping up the transition to renewable energy will play a significant role in cooling the planet and helping society adapt to the changing climate. 

Neglecting to invest in climate mitigation would also harm nature, as ecosystems and wildlife would bear the brunt of more intense natural disasters.

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"Research on climate change impacts across all regions and sectors is expanding rapidly," co-author Kamiar Mohaddes, an associate professor in economics at Cambridge and co-director of the climaTRACES Lab, said in a university news release.

"What stands out is that productivity loss — not merely capital destruction — is the primary driver of economic damage. It is also clear that climate change will reduce income in all countries and across all sectors, affecting industries ranging from transport to manufacturing and retail, not only agriculture and other sectors commonly associated with nature."

What climate actions are countries taking?

Luckily, the world is moving full speed ahead toward a more sustainable and equitable future. At COP28, an annual international climate meeting hosted by the United Nations, nearly 200 countries reached an agreement to accelerate the transition to clean energy and achieve net-zero emissions by 2050. 

Renewable energy sources experienced a historic expansion globally in 2023, and by the end of 2025, the International Energy Agency estimates that clean energy will surpass coal as the world's largest source of power. 

Since the burning of dirty fuels, such as coal, oil, and gas, is by far the largest contributor to rising global temperatures, switching our energy systems to clean power is vital to bring the Earth's temperature down and protect the global economy.

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