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Extreme Climate Change Threatens $274 Billion Cut to Australia's GDP

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Extreme Climate Change Could Cost Australia $274 Billion in Reduced Productivity

Australia faces potential economic losses of up to A$423 billion ($274 billion) due to reduced productivity if global action fails to address extreme climate change, warns the Australian government's latest Intergenerational Report (IGR). The report highlights the challenges Australia will face in the coming decades, including an aging population and slowing economic growth. Under worst-case scenarios where global temperatures rise by more than 3°C (37°F), the nation's productivity could be reduced by 0.2% to 0.8%. The Paris Agreement's goal of limiting global warming to 1.5°C is at risk, with the United Nations Intergovernmental Panel on Climate Change projecting that the threshold could be crossed as early as the 2030s. Australia's current climate policies are deemed insufficient to meet this target. The decline in productivity would have significant economic consequences, reducing economic output by A$135 billion to A$423 billion. This does not account for additional impacts on the tourism and agriculture sectors. Treasurer Jim Chalmers emphasizes the urgent need to address climate change and highlights the potential economic benefits of investing in critical minerals such as lithium, cobalt, and rare earths.

Climate Change's Economic Impact: A Wake-Up Call for New Businesses

Australia's potential economic losses due to extreme climate change, as highlighted in the latest Intergenerational Report, serve as a stark wake-up call for new businesses. The projected reduction in productivity, amounting to as much as A$423 billion ($274 billion), underscores the urgency of addressing climate change not just from an environmental perspective, but also from an economic one.

The Climate Risk to Business Productivity

Under worst-case scenarios, Australia's productivity could drop by 0.2% to 0.8%. For new businesses, this could mean a more challenging economic landscape, with potential impacts on profitability and growth. It's a clear signal that businesses must factor climate change into their strategic planning and risk management.

Opportunities Amid the Challenges

Despite the grim projections, the report also points to potential opportunities. Treasurer Jim Chalmers highlighted the economic benefits of investing in critical minerals like lithium, cobalt, and rare earths. For new businesses in these sectors, this could mean increased demand and growth opportunities.
In conclusion, while the potential economic losses due to climate change are alarming, they also underscore the importance of climate action for new businesses. By aligning their strategies with climate goals, businesses can not only mitigate risks but also tap into new growth opportunities.
Story First Published at: https://financialpost.com/pmn/business-pmn/extreme-climate-change-could-cut-australia-gdp-by-274-billion
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