Economists underestimate the economic impacts of climate change, which encourages neither the financial sector nor public authorities to invest in reducing carbon emissions, according to the NGO Finance Watch.
The economic risks linked to climate change are currently modeled in the same way as traditional financial risks, explains Thierry Philipponnat, chief economist of the NGO Finance Watch and author of a report published Tuesday.
However, the losses linked to climate change will be of considerable magnitude, unpredictable and permanent.
Certain climatic consequences, such as the thawing of permafrost or forest fires, will cause economic losses much higher than those of recent financial crises, according to the Brussels-based NGO.
As a result, policymakers’ economic models predict only a benign level of losses from climate change and their forecasts are highly unrealistic, the report finds.
This undervaluation of impacts risks distorting the cost/benefit analyzes used to design policies to combat climate change and investments in the transition, Finance Watch further denounces.
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