How does climate change threaten the economy?

by | Nov 5, 2022 | Climate Change, Environment

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According to a report published in 2021, the global economy is likely to lose 10 percent of its total economic value by 2050 due to the impacts of climate change. The report titled ‘The economics of climate change: no action not an option’ was published by the Swiss Re Institute. In a worst-case scenario, climate change could wipe off nearly 80 percent of GDP from the worldwide economy by 2050 if global temperatures rise to 3.2°C. Climate change can threaten the economy both directly and indirectly. Modern technology can give us much more detailed information about which assets and sectors will likely crumble in the future.

Here are a few ways in which climate change can threaten the economy worldwide:

Agricultural Sector

The agricultural sector is the most vulnerable to the impacts of climate change. Climate change associated with frequent and intense natural disasters can ruin agrarian production, resulting in damage to rural livelihoods. Global warming and fluctuations in precipitation are tough to notice but can still have severe effects on rural incomes.

According to the Intergovernmental Panel on Climate Change (IPCC), human activities have led to an increase in global temperatures by 1°C. Plant science warns that exposure to high temperatures will gradually decrease crop productivity. For example, the American Midwest will likely lose up to 25 percent of its current soybean and corn yield by 2050.

How does climate change threaten the economy?


International efforts are currently focusing on limiting global temperatures to 1.5o C by reducing greenhouse gas emissions, utilizing renewable energy sources, etc. Even if this goal is achieved, the world will continue to experience extremely warm weather conditions each year. Extreme heatwaves worldwide during growing seasons will result in huge losses for the agricultural sector. Farmers will struggle to cope with declining yields and income, while food prices will likely increase.


Most of society’s essential infrastructure is at risk from flooding events. The rising sea level could potentially cause a considerable loss of value of assets in trillion of dollars. The loss will include damage to houses, airports, docks, railways, and other public infrastructure located within a few feet away from sea level.

Military bases- including military installations near rivers- are also vulnerable to climate change. Extreme climatic conditions will necessitate more maintenance and repair for roads, constructions, runways, and equipment.

Climate change will affect communication systems as well. According to a 2018 study, approximately 4,000 miles of fiber optic cable, data centers, traffic exchanges, and termination points are at risk from sea-level rise. These infrastructures could be underwater by 2033 as most of it is located along coastlines. Climate change threats to internet systems and infrastructure could have huge implications for businesses worldwide.

Public Health and Productivity

The biggest threat to public health is climate change and global warming. Health personnel around the globe are already responding to health alarms caused by this crisis. More than 9,300 people are likely to die in American cities if temperatures rise to 4.5oC by 2090. The annual losses estimated for extreme temperature-related deaths are projected to be around $140 billion.

Every additional degree of warming will take a significant toll on each person’s health. However, the people whose health is the most at risk are the people who contribute least to climate change and who are least able to protect themselves from the impacts- people from low-income and disadvantaged countries.

How does climate change threaten the economy: Climate Change Linked to 5 Million Deaths a Year


Extreme temperatures are predicted to cause the loss of two billion labor hours per year by 2090- resulting in $160 billion of lost wages. The largest climate change-related economic losses in the United States will be from lost labor productivity, according to a Rhodium Group Study in 2014.

Tourism Sector

Due to a decrease in annual rain and snowfall, around two billion dollars could be lost in winter recreation. For example, rising temperatures in the Adirondack Mountains in Northern New York could destroy the winter activity sector, which makes up 30 percent of the local economy.

Recreational water activities and freshwater fishing could be affected as water temperatures increase. Warmer water temperatures decrease the water quality in an area as frequent and intense algae blooms, which can be toxic.

Regular and intense wildfires will worsen the air quality and discourage tourism. Rising sea levels could submerge small islands and coastal areas, while deforestation and its impacts on ecosystems could make some tourist destinations less attractive.

Financial Markets and Businesses

According to experts, climate change could increasingly influence investment decisions while also threatening global financial stability. The frequent and intense weather conditions worldwide can damage factories, operations, assets, supply chains, and other infrastructure, causing instability within global financial markets.

Worsening climate conditions will likely force businesses and companies to deal with the uncertainty in the price of resources for energy, insurance, and production. Few products may become outdated or lose their market- for example, equipment related to coal mining and skiing in a region that no longer has snow.

In 2018, the Carbon Disclosure Project requested over 7,000 businesses to assess their financial risks from climate change. The CDP then stated that unless the businesses and companies took preventive measures, 215 of the world’s largest companies could lose approximately one trillion dollars due to the impacts of climate change.



  • Dr. Emily Greenfield

    Dr. Emily Greenfield is a highly accomplished environmentalist with over 30 years of experience in writing, reviewing, and publishing content on various environmental topics. Hailing from the United States, she has dedicated her career to raising awareness about environmental issues and promoting sustainable practices.

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