As stocks gyrate in response to President Trump’s on-again, off-again tariffs, the world is understandably focused on the immediate chaos affecting the global economy.
Yet over the past few months a number of signals have pointed to a far more profound disruption on the horizon: the growing economic cost of climate change.
In a recent report about the rising demand for air-conditioning, Morgan Stanley casually observed that the planet was all but certain to blow past the goal of limiting the global average temperature rise to no more than 2 degrees Celsius above preindustrial levels, a threshold laid out in the Paris Agreement.
The company’s “base case,” the report said, was that the world was moving toward a temperature increase of 3 degrees Celsius.
That forecast, once thought of as extreme, is now becoming commonplace. The United Nations’ Emissions Gap report for 2024 said that the world was likely to warm 3.1 degrees Celsius over the course of this century without efforts to rapidly reduce emissions. The Intergovernmental Panel on Climate Change has forecast that without drastic action temperatures will be even higher than that by the end of the century.
A constant challenge when talking about global warming is appreciating that little numbers — a rise in temperatures by just a single degree, for example — represent utterly profound changes.
Which is why it’s worth pausing to consider what scientists have said about what the world would look like if average global temperatures rose 3 degrees Celsius, and what it will cost.
A planet transformed
At 3ºC of warming, rising seas are likely to inundate many coastal cities, including metropolises like Rio de Janeiro, Shanghai, Miami and Osaka, Japan.
A litany of other problems, including extreme weather, unrelenting heat waves, the proliferation of insect-borne diseases, widespread species extinction and declines in crop yields, would also get worse.
It’s impossible to know the actual cost of all these disruptions. Yet as the prospect of more intense warming becomes more likely, some estimates are beginning to emerge.
By 2049, costs from the effects of climate change could total more than $38 trillion annually, according to a paper by scholars at the Potsdam Institute for Climate Impact Research.
In the United States alone, climate change is expected to wipe away $1.47 trillion in value from real estate around the country by 2055, according to a February report from First Street, which models climate risk.
Just in New York City, more than 80,000 homes could be lost to floods in the next 15 years, my colleagues Mihir Zaveri and Hilary Howard reported this week.
Beyond the immediate losses inflicted by severe weather and flooding, a decline in output is likely as crops fail and extreme heat strains supply chains.
Researchers at ETH Zurich recently calculated that in a world that has warmed 3ºC, global gross domestic product is likely to fall by an average of 10 percent, with poorer countries hardest hit.
‘Systemic risk’
In a recent post on LinkedIn, Günther Thallinger, a member of the supervisory board of Allianz SE, the Swiss insurer, offered a stark warning about what these costs could mean for the financial system.
Climate change is simply making some things uninsurable.
“The math breaks down: the premiums required exceed what people or companies can pay,” he said. “This is already happening. Entire regions are becoming uninsurable.”
But the risks extend well beyond the insurance business, Thallinger said.
“This is not a one-off market adjustment,” he wrote in his post. “This is a systemic risk that threatens the very foundation of the financial sector. If insurance is no longer available, other financial services become unavailable too. A house that cannot be insured cannot be mortgaged. No bank will issue loans for uninsurable property. Credit markets freeze. This is a climate-induced credit crunch.”
At that point, Thallinger wrote, “the financial sector as we know it ceases to function.”
“And with it,” he added, “capitalism as we know it ceases to be viable.”
Climate data
Trump administration cuts funding and staff for flagship climate report
The Trump administration has cut funding and staffing at the program that oversees the federal government’s premier report on how global warming is affecting the country, raising concerns among scientists that the assessment is now in jeopardy.
Congress requires the federal government to produce the National Climate Assessment every four years. It analyzes the effects of rising temperatures on human health, agriculture, energy production, water resources, transportation and other aspects of the U.S. economy.
The report is used by state and city governments, as well as private companies, to prepare for global warming. The last assessment came out in 2023. — Brad Plumer
Read more.
Regulations
A wave of Trump moves on climate
In the past few days, the Trump administration has signed a series of executive orders and announced other moves on climate. Here’s what has happened:
Trump signs orders aimed at reviving a struggling coal industry: Trump signed a flurry of executive orders aimed at expanding the mining and the burning of coal in the United States. One order directs federal agencies to repeal any regulations that “discriminate” against coal production, to open new federal lands for coal mining and to explore whether coal-burning power plants could serve new A.I. data centers. — Brad Plumer and Mira Rojanasakul
Learn more and read five takeaways from Trump’s plan to rescue coal.
Trump threatens climate policies in the states: First, the Trump administration moved to dismantle federal climate regulations. Now, it has launched an assault on efforts at the state and local levels, where many leaders are still working to try to avoid the dangerous impacts of global warming.
Trump outlined the move in an expansive executive order he signed on Tuesday directing the Justice Department to block all “burdensome and ideologically motivated ‘climate change’ or energy policies that threaten American energy dominance and our economic and national security.” — Lisa Friedman
Read more.
Trump administration cuts research funding, claiming it creates “climate anxiety”: The administration announced it is cutting nearly $4 million in federal funding for climate change research at Princeton University, saying that the work promoted “exaggerated and implausible climate threats” and increased “climate anxiety” among young Americans.
The cuts to programs that study topics like sea-level rise and coastal flooding were announced Tuesday by the Commerce Department, which houses the National Oceanic and Atmospheric Administration, one of the world’s top climate science agencies. — Brad Plumer and Austyn Gaffney
Read more.
