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JP Morgan: Climate change could shave up to 5% off world growth

Donovan Russo
Group of demonstrators on road, young people fight for climate change - Global warming and enviroment concept - Focus on banner
Group of demonstrators on road, young people fight for climate change - Global warming and environment concept - Focus on banner

The earth is getting hotter — and the macroeconomic consequences could deal a significant blow to global growth, JPMorgan Chase (JPM) said on Friday.

According to new research, the bank’s warned that in the absolute worst case, rising temperatures globally could shave 5% from global growth by the end of the century.

“Business as usual suggests significant further global temperature increases,” wrote David Mackie, an analyst for JP Morgan.

The study stressed that lots of factors affect the climate, and some assumptions were far from being set in stone.

“But we should probably not take these estimates at face value,” Mackie added. “Assessing the macroeconomic impact of climate change is very hard due to endemic uncertainty.”

Still, the study said policies must be implemented in order to limit rising temperatures to 2-3°C.

“A review of the literature suggests that the macroeconomic impact of 2-3°C global warming relative to pre-industrial times ranges from 0-5% of global GDP,” Mackie said.

“If we take them at face value, these estimates suggest that at worst global GDP at the end of the century will be 5% lower than if global warming were not taking place, provided policies are taken to limit the temperature increase to 2-3°C.”

Paris targets ‘out of reach’

The 2015 Paris agreement—aimed to lower global rising temperatures below 2°C by the end of the century—looks challenging, Mackie said, especially since President Donald Trump decided to pull out of the landmark accord.

The accord’s stated objective of a slower 1.5°C rise “is probably out of reach,” the economist said.

“If no new policies are enacted relative to what was legislated as of the end of 2017, emissions would rise,” Mackie added.

“This would likely mean a global temperature increase of around 3.6°C at the end of the century relative to pre-industrial times.”

However, Mackie also emphasized that this report is only a market-based measure of economic activity, and that similar studies tend to ignore the impact of human health, mortality and biodiversity.

Moreover, there is uncertainty about the evolution of GHG emissions, the impact of GHG emissions on temperature, as well as the impact of temperature change on the environment and the impact of climate change on the economy.

JPMorgan’s report was the latest in a series of increasingly dire warnings about environmental degradation, and follows one study that suggested climate change could cost businesses $1 trillion.

Donovan Russo is a writer for Yahoo Finance. Follow him @Donovanxrusso.

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