Climate change left unaddressed will make the average person substantially poorer within a generation, according to a report from LSE's Grantham Research Institute on Climate Change and the Environment. Synthesising nearly 300 studies, the researchers estimate that by 2050 average income per person could fall by between 3 and 15 per cent of GDP per capita under a plausible worst case in which warming reaches 2.2 to 2.8 degrees Celsius above pre-industrial levels with no further increase in adaptation.
The burden falls hardest on those least able to bear it. For low-income and lower-middle-income countries, the projected losses range from 8 to 18 per cent of GDP per capita, compounding existing development challenges and debt pressures. The report also traces the fiscal channel: climate damage erodes tax bases while driving up spending on disaster response and reconstruction, threatening government budgets, debt levels and borrowing costs simultaneously.
The authors are careful about uncertainty in both directions, noting that the underlying studies are not comprehensive, omit some flood and storm impacts as well as tipping points, and are therefore likely to be significant underestimates of the potential consequences. Their constructive message is that early adaptation investment can meaningfully limit the damage to public finances, bolstering economic stability at a fraction of the cost of inaction.