The planet is getting hotter, while floods, droughts, and wildfires are causing increasing destruction and losses. The economy does not register this. Scientists have found that the economic models used by governments and investors do not regard climate change as something significant.
This is stated in a report by the scientific team Green Futures Solutions at the University of Exeter, which was covered by Euronews.
“Current economic models systematically underestimate climate damages, as they cannot account for the most important factors – cascading failures, threshold effects, and deepening shocks, which define climate risk in a warmer world and may undermine the very foundations of economic growth,” said the study’s lead author, Dr. Jesse Abrams.
Warming also means more extreme weather events
In economic models, damage is most often calculated based on changes in global temperature. However, warming also manifests itself in another, more destructive way – extreme disasters, such as droughts, floods, and large-scale fires.
In Europe alone, the economic impact of weather catastrophes during the summer of 2025 amounted to at least €43 billion. At that time, climate change caused losses over 25% of the European Union’s territory. By 2029, losses due to climate change are projected to reach a staggering €126 billion.
Statistically, damages in 2024 made up 0.26% of the EU budget. Researchers from the University of Mannheim, who calculated these figures, emphasize that their estimate did not take into account wildfires or the combined impact when multiple extreme weather events occurred simultaneously.
The blow was not limited to Europe’s economy. Monsoon floods in Southeast Asia generated €133 billion in losses in Thailand alone. Tropical hurricanes in the region have become more aggressive due to climate change, exacerbated by deforestation.
Not just a statistical detail
The core conclusion of the report is that climate change is no longer a minor shock to the economy. It is destructive, tangible, and extremely costly for the world’s economies. The shift in established weather patterns, combined with drastic manifestations, disrupts the functioning of multiple sectors simultaneously.
“Instead of simply reducing output, climate change will likely alter core economic structures, shifting where people live, what can be produced, how infrastructure functions, and which regions remain economically viable,” the researchers write.
The consequences of weather disasters are often cascading. Drought in one region leads to food shortages in another that depends on it. Many economic models still treat such events in isolation. Scientists insist that the risks from climate change accumulate and are transmitted further along the economic chain.
An abstract GDP
The researchers claim that economists have created a “magical economic bubble.” In it, GDP grows constantly, while climate damages chip away at this ever-expanding mass.
The problem lies in the fact that GDP does not reflect the real challenges facing the economy. This principal indicator understates the true environmental damage. Moreover, when making calculations, economists simply ignore such phenomena as mortality and inequality, population displacement, cultural loss, and ecosystem degradation.
“In some cases, GDP may even increase after natural disasters due to unfinished reconstruction, completely masking losses in well-being. As a result, GDP-oriented assessments can give politicians and financial institutions a false sense of resilience, even as underlying vulnerability increases,” the report added.
Earlier, EcoPolitic reported that the world has entered an era of total water bankruptcy. In its corresponding report, the United Nations stated that the consequences are already irreversible, so humanity must learn to live under these new conditions.
