Climate change: Clear and present danger for global economy
Climate change is real, mostly caused by humans, and is getting worse; it’s the long-established consensus in the scientific world. Last year was among the planet’s third warmest on record, the World Meteorological Organisation said last week. European Union scientists also confirmed average temperatures have now exceeded 1.5C of global warming for the longest since records began.The WMO, which consolidates eight climate datasets from around the world, said six of them - including the EU’s European Centre for Medium-Range Weather Forecasts (ECMWF) and the British national weather service - had ranked 2025 as the third warmest, while two placed it as the second warmest in the 176-year record.The US National Oceanic and Atmospheric Administration also confirmed in data released last week that 2025 was the third-warmest year in its global temperature record, which dates back to 1850. All eight datasets have confirmed that the last three years were the planet’s three hottest since records began, according to the WMO. The warmest year on record was 2024.Higher temperatures are seen to worsen poverty and inequality.A 1C increase in temperature causes headcount poverty increases of 0.63–1.18 percentage points, using the daily poverty lines of $2.15 (corresponding to 8.3% and 15.6% increases), and increases in the Gini inequality index of 1.3–1.9%, according to the Nature journal.These poverty estimates equal a projected increase of global poor by 62.3mn–98.7mn people by 2030 compared with a scenario without climate change. Poorer countries — particularly those in Sub-Saharan Africa — are more vulnerable to climate change, as are countries with higher agriculture shares in the economy, according to the journal.Governments pledged under the 2015 Paris Agreement to try to avoid exceeding 1.5C of global warming, measured as a decades-long average temperature compared with pre-industrial temperatures.But their failure to reduce greenhouse gas emissions means that the target could now be breached before 2030 - a decade earlier than had been predicted when the Paris accord was signed in 2015, according to ECMWF.Exceeding the long-term 1.5C limit would lead to more extreme and widespread impacts, including hotter and longer heatwaves, and more powerful storms and floods. Already in 2025, wildfires in Europe produced the highest total emissions on record, while scientific studies confirmed specific weather events were made worse by climate change, including Hurricane Melissa in the Caribbean and monsoon rains in Pakistan, which killed more than 1,000 people in floods.Despite these worsening impacts, climate science is facing political pushback. US President Donald Trump, who has called climate change “the greatest con job”, last week withdrew from dozens of UN entities including the scientific Intergovernmental Panel on Climate Change.Environmental concerns are now being de-prioritised in the short term, according to the World Economic Forum’s Global Risks Report 2026. All environmental risks also declined in severity score for the two-year time horizon compared with last year’s findings.But in the next 10 years, environmental risks have retained their ranking as the most severe, with extreme weather events identified as the top risk and half of the top 10 risks being environmental in nature, according to the WEF report. Natural disasters caused $220bn in global economic losses in 2025, according to projections by reinsurer Swiss Re, while Munich Re put the losses around $224bn.Despite the proliferation of governments’ and companies’ climate targets, CO2 emissions remain stubbornly high. Every 1C rise in global temperature is generally estimated to cause a 12% decline in global GDP, while in extreme scenarios - if temperatures rise by 3C by 2100, some studies predict global GDP could plummet by 40% to 50% relative to a world without climate change.Almost $200tn of investment is needed by 2050 to reach net-zero emissions, according to a BloombergNEF estimate in 2023.