The world faces an uncertain future if the climate targets outlined in the Paris Agreement are not met. The cost would not just be environmental and human, but also economic. Labour and supply chain crises would proliferate as extreme weather events, drought and rising sea levels coincide, leaving large parts of the world uninhabitable. The insurance industry would struggle to cover stressed assets (as we are already seeing in Florida post-Hurricane Ian) as climate events become more frequent. And economies would face low growth and stagflationary pressures.
The global economy is already reeling from stretched labour pools and supply chain issues, many of which have origins linked to the climate crisis. Covid-19 brought about unprecedented fiscal stimulus spending by Western governments, but now the cost of borrowing is on the rise. As central banks try to stem inflation by raising rates, the cost of servicing debt is ballooning. Consumers are battered by wage stagnation and consumer credit is becoming less affordable. China has only just emerged from tough lockdowns that hampered global manufacturing output, further impeding recovery. In addition, Russia’s invasion of Ukraine led to an unprecedented redirection of global energy flows, severing the links between many advanced economies and two of the world’s foremost producers of food and raw materials.
