A recent study by UCL researchers reveals that the economic toll of climate change will skyrocket as global temperatures rise, with cascading disruptions to global supply chains heightening the problem. Published in Nature, the study explores the “indirect economic losses” that will affect even geographical regions less directly impacted by warming, further amplifying global financial losses.
This blog outlines key insights from a recent news report on how climate change-induced supply chain disruptions are amplifying global economic challenges.
Climate Change & Supply Chain Disruptions
The research highlights that disruptions in global supply chains—like crop failures or labor shortages—can trigger a domino effect, which might result in economic slowdowns across industries worldwide. As economies become growingly interconnected, a disruption in one geographical region can affect raw material supplies and manufacturing processes in far-flung regions, increasing global economic instability.
Exponential Losses Across Different Emission Scenarios
The researchers compared three global warming scenarios based on varying levels of carbon emissions, named ‘shared socioeconomic pathways,’ concluding that economic losses will be drastically higher with greater warming. By 2060, the projected total economic loss is estimated to range between $3.75 trillion and $24.7 trillion, depending on emission levels. The worst-case scenario, with a 7°C rise, would result in a staggering 3.9% global GDP loss, while the most favorable scenario, limiting warming to 1.5°C, would see losses of around 0.8%.
Supply Chain Disruptions As A Growing Contributor
As the planet warms, supply chain disruptions will become a more significant contributor to economic losses. The research also indicates that the projected economic losses will be nearly five times as high under the highest emissions path as under the lowest emissions path by 2060. Under the same time frame, total GDP losses will be 0.8% at 1.5° warming, 2.0% at 3° warming, and 3.9% at 7° warming.
Economic & Human Costs Across Regions
Extreme heat waves and their effect on supply chains will disproportionately impact different regions. Low-latitude countries, including those close to the equator, are likely to suffer the most, although high-latitude regions like Europe and the United States are also at risk. Under a high-emissions scenario, Europe could lose about 2.2% of its GDP, while the US might see a 3.5% decline.
In the UK, industries such as chemicals, tourism, and electrical equipment will bear the brunt of economic losses, while supply chain disruptions from equatorial countries will further affect their output. The human toll will also rise, with up to 1.12 million additional annual heatwave deaths projected under the highest emission scenario by 2060.
Which Industries Are At Risk?
Two industries identified as vulnerable to climate-induced supply chain disruptions are Indian food production and tourism in the Dominican Republic. India’s food industry relies heavily on imports from geographies like Southeast Asia and Africa, both of which are expected to suffer significant climate impacts. This will somehow downsize India’s access to essential raw materials, impacting its exports and resulting in higher food prices globally.
Similarly, the Dominican Republic’s tourism industry is projected to suffer due to rising temperatures, which will make the region less attractive to vacationers. This would ripple through its economy, affecting sectors such as manufacturing, construction, and financial services.
The Need For Global Cooperation
The study underscores the urgent and dire need for global collaboration to mitigate the effects of climate change, particularly on vulnerable supply chains. Experts believe that preventing every additional degree of climate change is critical. Likewise, it is essential to understand what nations and industries are most vulnerable is crucial for devising effective adaptation strategies.
The research emphasizes that developing countries, despite contributing less to global carbon emissions, will experience disproportionate economic damage. To address this, collaborative adaptation strategies are necessary to minimize the risks and strengthen resilience against future climate impacts.
In Summary
In conclusion, the study underscores the urgent need for global collaborative action to cater to the interconnected threats of climate change and supply chain disruptions. With increased global warming, the economic consequences of these disruptions will become more severe, particularly for vulnerable nations and industries. To mitigate these risks, it is essential to reduce greenhouse gas emissions, develop resilient supply chains, and build international cooperation.
(Also Read: Why Does Healthcare Need Supply Chain Automation?)
