If recent estimates of the effect of global warming on global GDP are correct, investment to avoid global warming is the most profitable of all investments

Two economists (A. Bilal of Harvard University and D. Känzig of Northwestern University) recently showed that a 1 ° C rise in global temperature would lead to a 12% loss in global GDP after six years, which is much higher than previous estimates 1 . Avoiding 1 ° C of global warming would therefore increase global GDP by USD 12,600 billion (each year). This amount is much higher than the estimated cost, each year, of the investments needed to keep global warming at 2 ° C (instead of 4 ° C without action to stabilise the planet’s temperature), which is around USD 2,600 billion per year, for the next 25 years. If these estimates are correct, investing to avoid global warming is by far the most profitable investment we can make. According to these new estimates, the social cost of one tonne of carbon is around USD 1,000 per tonne of CO 2 , while the cost of decarbonisation is between USD 30 and 100 per tonne. 1 A. Bilal, D. Känzig, “The Macroeconomic Impact of Climate Change: Global vs. Local Temperature”, NBER Discussion Paper no. 32450, May 2024.