By Abdullahi Lukman
A recent study by Australian researchers has revealed that the economic impacts of global warming could be far more severe than previously estimated. The study, published on March 31, 2025, in Environmental Research Letters, suggests that even a modest temperature increase of 2°C could result in a 16% drop in global per capita income—far worse than the earlier forecast of a 1.4% decline.
Led by Dr. Timothy Neal from the University of New South Wales’s Institute for Climate Risk and Response, the research underscores the significant economic risks associated with climate change, particularly through disruptions to global supply chains caused by extreme weather events.
These findings challenge previous economic models, which failed to fully incorporate the potential effects of climate-related events on supply chains and economic output.
The study also highlights that current projections indicate global temperatures are likely to rise by at least 2.1°C, even if countries meet their short-term and long-term climate goals.
This marks a worrying shift, as previous integrated assessment models (IAMs), used by governments to plan climate mitigation strategies, did not account for the cascading effects of extreme weather on global trade and supply chains.
Dr. Neal emphasized the need for more accurate models that incorporate these climate risks, stating, “In a hotter future, we can expect cascading supply chain disruptions triggered by extreme weather events worldwide.”
He also rejected the notion that colder regions, like parts of Canada, northern Europe, and Russia, might benefit economically from climate change. Neal argued that the interconnected nature of the global economy means all countries would feel the impact, not just those in warmer regions.
The study also pointed to the urgent need for ambitious climate policies, suggesting that the economic benefits of such policies have been severely underestimated.
In response to the findings, climate policy expert Prof. Frank Jotzo criticized the assumption in IAMs that agricultural losses in one region would be offset by gains elsewhere. He stated that such assumptions contradict the reality of physical impacts and economic interdependencies.
Anne Jellema, Executive Director of 350.org, emphasized the high cost of inaction on climate change, calling for a shift to renewable energy sources such as solar and wind, which are now cheaper than fossil fuels.
These sources, she argued, offer both immediate economic benefits and long-term protection against the impacts of global warming.
Mark Lawrence, a climate risk researcher at the University of Adelaide, also found the study’s results credible and suggested that the actual economic consequences of climate change could be even worse than projected.
He reiterated the urgent need for immediate action to mitigate these impacts and address the underestimated economic benefits of proactive climate policies.