Extreme climate change could cut Australia GDP by $370 billion

CANBERRA – Australia could face economic losses of as much as A$423 billion (S$370 billion) in reduced productivity if global action fails to halt extreme climate change, one of a raft of challenges in the coming decades along with an ageing population and waning growth.

The nation’s productivity could be cut by between 0.2 per cent to 0.8 per cent under worst case scenarios in which a rise in global temperatures exceeds 3 deg C, according to the Australian government’s latest Intergenerational Report (IGR) that was released on Thursday.

While the Paris Agreement seeks to hold planetary warming to 1.5 deg C, the United Nations Intergovernmental Panel on Climate Change has warned the world is already on track to cross that threshold as soon as the 2030s. Australia’s own climate policies are currently insufficient with efforts to stay within that limit, according to Climate Action Tracker, a research project led by non-profit groups.

The productivity slide would be a “significant economic cost”, the IGR said, reducing economic output by between A$135 billion and A$423 billion in today’s dollars. That is before additional impacts on Australia’s lucrative tourism and agriculture sectors from global warming, it added.

Treasurer Jim Chalmers said the report highlighted that tackling climate change was a “global environmental and economic imperative”.

“The IGR makes clear the costs that could come with rising temperatures, the impact on specific sectors like agriculture and tourism, plus, the vast scale of investment needed to respond – some additional A$225 billion, to decarbonise heavy industries and transition our energy system,” he said, speaking at the National Press Club.

Productivity growth will slow to 1.2 per cent a year over the coming decades, while the population is expected to expand at a slower rate, rising to 40.5 million people by the year 2063.

Mr Chalmers emphasised the potential economic benefits of acting quickly to tackle the challenges highlighted, including bulking up Australia’s critical minerals sector to take advantage of a natural abundance in lithium, cobalt and rare earths.

Critical minerals are the “opportunity of the century,” he said.

The report foresaw a mixed picture for Australia’s economic future over the next 40 years. While the economy is expected to more than double in size and incomes will increase by 50 per cent, gross domestic product growth is forecast to slow to an annual rate of 2.2 per cent while the number of people over the age of 85 will more than triple. BLOOMBERG

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