Title: Urgent Global climate risks threaten economic stability, warns World Economic Forum
Meta Description: The World Economic Forum’s Global Risks Report 2024 highlights extreme weather as the second most pressing short-term global risk and the most pressing long-term risk. As climate change impacts become more severe and frequent, countries are facing significant economic losses.
SEO Keywords: climate change, extreme weather, economic losses, global risks, World Economic Forum
Article:
The World Economic Forum’s (WEF) Global Risks Report 2024 has sounded the alarm on the escalating threat of climate change, with extreme weather events ranking as the second most pressing short-term global risk and the most pressing long-term risk. As the consequences of climate change become more visible and costly, countries are grappling with substantial economic losses.
Steep costs of inaction
In a scenario where no climate action is taken, the European environment agency calculates that the EU could face economic losses equivalent to 10.5% of its GDP by 2050. However, achieving the Paris Agreement’s goal of limiting global warming to well below 2°C could reduce these losses to 2.8% of the EU’s GDP by the same year.
Figure 1: A tree uprooted by a storm in Jūrmala, Latvia, in August 2024. (Source: AFP, Gints Ivuskans)
The Swiss Re Institute’s analysis shows that developed regions like the EU will be more negatively impacted by climate change than developing regions. Without climate action, global GDP could drop by as much as 18.1% by 2050. Meanwhile, meeting the Paris Agreement’s targets could limit this loss to 4.2%.
Direct and indirect costs
The WEF’s 2024 The Cost of Inaction report estimates that the world has spent $3.6 trillion on climate-related disasters since 2000. Yet, the indirect costs of climate change, such as decreased labor productivity during heatwaves and reduced agricultural yield due to erratic weather patterns, are not well-accounted for, indicating that the total costs may be even higher.
Figure 2: Flooding in Valencia, Spain, in November 2024. (Source: EPA, J.J. Guillén)
To avoid potential economic Armageddon, the WEF report suggests allocating 2% of global GDP to climate mitigation and an additional 1% towards adapting to current climate impacts. Without such investments, global GDP could decline by up to 15% due to climate change by the end of this century.
Europe ahead of the curve
European countries are more concerned about climate change than their Latvian counterparts, according to the Eurobarometer survey. While 38% of Europeans consider extreme weather their top concern, only 28% of Latvians share the same sentiment. Furthermore, Latvians place climate change as their fourth priority (28%), following security (33%), migration (29%), and economic growth (28%).
However, when it comes to investing in renewable energy and sustainable practices, both EU citizens and Latvians agree on the importance of prioritizing green initiatives. Notably, 5% of Latvians view climate change as a major challenge for the EU, while only 1% perceive it as a significant threat to Latvia.
Figure 3: Solar panels and wind turbines in the Netherlands. (Source: Getty Images, Robin traffers)
Despite limited public concern, Latvia has seen substantial climate-related losses over the past decade. Between 2014 and 2023, the country has incurred climate-related damages totaling €627 million. In contrast, Lithuania’s losses reached €1.1 billion, while Estonia’s were €4 million.
Opportunities abound
While the costs of inaction are steep, investing in climate action presents an opportunity for economic growth and resilience. The global green economy is projected to grow at a compound annual growth rate (CAGR) of 7.6% from 2020 to 2027, reaching $10.1 trillion by 2027. Moreover, the European Commission estimates that achieving Europe’s climate goals could create 3.8 million jobs and boost the EU’s GDP by 1-2% by 2050.
Latvia is well-positioned to capitalize on this green opportunity. The country’s green economy accounted for €921 million in added value in 2021, employing approximately 24,000 people. To fully embrace the green transition, Latvia should focus on policies that foster innovation, attract green investment, and enhance the country’s competitive edge in the global green economy.
In conclusion, the escalating threat of climate change poses significant economic risks, while presenting opportunities for growth and resilience. As the world becomes increasingly aware of these challenges and opportunities, countries like Latvia must prioritize climate action to secure a prosperous and sustainable future.
