Introduction

Climate change refers to long-range climatic measurements changing throughout human history. An example of this would be the global average temperature, which has increased by almost 1° since 1880, according to NASA (NASA Earth Observatory, 2023).

However, so far, the repercussions of this have been noticeable in many locations around the world, but in some more than others. For example, the Maldives, which is a low-lying archipelago of 1,196 islands off the southern coast of India and home to nearly 555,000 people, could be uninhabitable by 2050 as sea levels rise by 3 to 4 millimetres per year. (McConnell, 2022), (NASA earth observatory, 2020) One of the other major threats due to climate change is desertification, which is the degradation of drylands, most of the time, an area of the planet that is very dependent on yearly rainfalls to keep them arable. The degradation of these regions of the planet could affect up to 40 per cent of the world’s terrestrial surface area. (Nunez, 2019), (Houerou, 1996)

With all this turmoil and uncertain times ahead, how well will the global economy be able to weather the price of human economic development across the centuries?

What research has been conducted

The question of the cost of climate change has been long researched, with figures changing as to the exact cost to the global economy. Still, countries and groups can predict with greater accuracy the cost of transitioning to net zero as they have a better understanding of the different components of their country. These could include public perceptions of different renewable energy methods and the financial state of the government.

The European Union has suggested that reaching net zero will cost around 2.8% of the gross domestic product (GDP). (Deutch, 2020) Which, according to the EU, is around €14.5 trillion, meaning €406 billion would have to be invested each year to reach net zero. (European Union, 2012)

A government budget watchdog has said that the cost of reaching the United Kingdom’s climate targets will be PS1.4 trillion and add 469 billion to the country’s national debt, which as of January 31, 2024, stood at £2.65 trillion. (Daily Mail, 2021), (Giles, 2021)

The International Monetary Fund has proposed a recovery plan for the energy sector, saying 1% of the global GDP per year is needed to transition the industry to be sustainable. (Deutch, 2020) This investment would just be for the energy sector. If we want to reach net zero by 2050, an additional $3.5 trillion would need to be spent on physical assets per year. This figure takes into account the energy sector. (McKinsey Sustainability, 2023)

I do not have the resources to make my own estimate as to the cost of climate change on the global economy; however, I can collect data on the public perception of climate change, which then can either argue for or against the steep cost of net zero. Furthermore, I can  

What are the key components of the global economy?

The global economy is incredibly complicated, with thousands of components to make it all run smoothly. These range from open and easy access to global markets, particularly global waterways. An economy leaning towards capitalism allows businesses to start up and keep some, not all, of their profits, which can be used to invest in new business ventures or enhance their competitiveness in their current sector.

Case Studies

London

London is an Alpha++ city, according to the Globalisation and World Cities Research Network (GaWC), placing the city in the same category as New York. This ranking takes multiple factors of a city into account to determine the city’s rank; these include accounting, advertising, banking/finance, and law. This makes the report from the GaWC a good insight into the city’s global importance to the world economy.

The two main factors contributing to London’s importance to the global economy are its position as one of the main financial centres in the world and being the home of the Government of the United Kingdom.

London’s position in the world, allowing it to access Asian and North American markets, is one of the factors that has built up London into what it is today. Its foreign exchange market has a 38% share of the global market (2.85T) as well as 45.5% of the over-the-counter (OTC) derivatives trading. (Szalay, 2022), (TheCityUK, 2023) Disruptions to this would have major effects on the global financial system.

London’s local authority believes that by the mid-21st century, average summers will be one-fifth drier and 3°C warmer. (The London Assembly, 2024) These consequences of a changing climate would put increasing pressure on the city’s water resources, which have been in the news frequently due to the region experiencing less rainfall than usual. In 2022, the city experienced 10 months out of the last 12 with below-average rainfall, which caused major stress on the water system. (The London Assenbly, 2022)

The CEO of the Environment Agency has said that in 25 years, London and the southeast of England could completely run out of water, which would cost London’s economy some £330 million per day. Considering London’s position in the global economy, such an effect will be felt across the globe, particularly affecting London’s financial infrastructure.

New York

As well as London, New York is an Alpha++ city due to similar reasons as London. New York has long been the largest financial hub in the world, being home to some of the world’s most well-known companies’ global headquarters, with 45 of the Fortune 500 companies based there, as well as the first and second largest stock market in the world when measured by market capitalization. The majority of the city’s financial services are located in Manhattan, with the famous Wall Street located on the southern tip of the borough.

The biggest threat to New York comes from rising sea levels, due to heated water expanding and from inland glaciers melting, which would not completely flood the city, at least not in the next century. The major threat would be storm surges, as higher ocean temperatures increase the severity of the storms and higher sea levels make it easier for seawater to get on land. This threat from storm surges would put the southern tip of Manhattan at risk and considering major institutions like the New York Stock Exchange are found in this area it is of paramount importance to make sure these areas are protected from the risks.

Figure 1: 100-year predicted flood zone using the static approach. Source: (New York City Environmental Protection, 2018)

Global displacement

Apart from the effect on some of the world’s most important financial centres, one, if not the costliest, repercussion of climate change would have to be the displacement of hundreds of millions of people as a result of the changing climate. In 2014 alone, 17.5 million people were displaced because of climate change. (Thomas, 2017)

Threats from storms lead to human displacement, which adds pressure on other regions and causes vast economic damage. From 1970 to 2019, two million people were killed, and some $3.64 trillion worth of damage was dealt with, with 91 per cent of that coming from developing countries. (United Nations , 2021) Figures like these showcase that the cost of natural disasters is astronomical, and with humanity becoming more and more reliant on specific components of our modern world, these costs are likely to continue increasing.

One of the biggest threats to the global economy is desertification, which, as mentioned earlier, is the degradation of dryland environments around the world. Recent data suggests that 2 billion people call the dryland regions of the Earth their home, and by 2030, 50 million could be displaced as a result of desertification. (Nunez, 2019) The sheer number of people that could be displaced is a major cause for alarm, as these people will look for a safe place to live and will no doubt look towards regions like Asia, Europe, and North America that are already starting to struggle with spreading their resources around.  

With the alpine glacier of the Alps often referred to as the “water tower of Europe,” climate change will decrease the volume of water in some of Europe’s major river catchments, with Alpine glaciers losing between 50% and 90% of their current volume. (Beniston, 2012) Putting at risk many industries and the drinking supply for some 170 million people. A large influx of climate refugees will put more pressure on the continent’s water supplies. (EuroNews, 2022)

What have I found?

I sent a poll to people of all age groups, asking if they think their country’s government should invest in reaching net zero and if their country’s government can afford to invest in reaching net zero. I have done two polls, as they can both be correlated with one another as to the public’s perception of climate change and their opinion on how seriously they think their government is taking the issue. The countries represented in this poll are the United States, United Kingdom, Poland, and Germany.

Poll One

Should your country’s government invest in reaching net zero?

Yes	15
Maybe in 5 years	1
No	4

Poll Two

Can your country’s government afford to invest in reaching net zero?

Yes	0
No	20

What my data says about the public’s opinion and how this affects the global economy.

The data from the polls suggests that the public believes that climate change is a problem that needs to be solved and invested in; however, they also believe that their country does not have the capital to facilitate the transition towards net zero. This public viewpoint will begin to increase as the effects of climate change start to affect their lives more, which will increase the pressure on governments to act.

Therefore, unless schemes such as apprenticeships are implemented, fewer people will benefit from this government funding, as people who are already in the industry will continue to have jobs. In addition, the mounting debt piles of countries will continue to affect their ability to invest in other sectors of their country’s economy, possibly hampering its growth.

Ways to improve the global situation.

There is no easy solution to the climate crisis, but one thing is for sure, if something is not done about it, the global economy will suffer. It is a problem that will not be influenced by a few individuals changing their habits but by a global effort to reduce demand for those industries and products that produce the most greenhouse gas emissions. However, large portions of the world, including some of the ‘Western nations’, are currently facing a period of lower disposable income. In the United Kingdom, for example, “300,000 more children were plunged into absolute poverty in a single year” during the peak of the cost-of-living crisis in 2022-23, showing that people are not in the best place financially to make sacrifices to benefit the climate. (The Guardian, 2024)

Conclusion

The global economy is a fragile network with many features that interplay with one another, with tiny disruptions affecting multiple parts of the system. Climate change is already causing disruptions across the globe, even though public opinion on the matter is in favour of government investment to reach net zero. However, the public does realise that their governments simply cannot afford to make these investments. Cities like London and New York, which have established themselves as global financial centres, will have to make sure mitigation strategies are in place to protect their most vulnerable parts of the central business districts. Furthermore, cities and governments around the world will have to deal with climate refugees as a result of displacement from natural disasters and desertification. That then brings up the question of whether countries like the United Kingdom, France, Canada, and the United States have the resources to deal with this looming influx.  

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