Climate change could cost some countries up to 19 percent of their gross domestic product by 2030, a panel including major insurance, banking and consulting companies as well as the European Commission said on Monday.
Developing nations will be most vulnerable to the effects of climate change but a lot of their economic loss could be avoided, a report by the Economics of Climate Adaptation (ECA) Working Group said.
Together with prevention and mitigation measures, risk transfer like insurance or catastrophe bonds can play an important role by capping losses from catastrophic events, increasing willingness to invest and providing price signals to financial markets, the working group said.
The ECA working group is a partnership between reinsurance group Swiss Re, consulting firm McKinsey & Co., the Global Environment Facility, ClimateWorks, the European Commission, the Rockefeller Foundation and Standard Chartered Bank.
Current adaptation measures like sea barriers, improved drainage and building regulations could prevent 40 to 100 percent of risk to 2030, from current and future climate conditions, the working group said.
The United Nations Framework Convention on Climate Change has estimated that the world will spend an extra $36 billion to $135 billion each year by 2030 to address the impact of climate change.
If current development trends continue to 2030, the locations studied will lose between 1-12 percent of GDP as a result of existing climate patterns, the report said.
When future threats and the effects of economic growth are taken into account, the total potential loss rises to as much as 19 percent of GDP.
The group's research focused on vulnerable areas in northern China, Georgetown in Guyana, Maharashtra in India, Mopti in Mali, the island of Samoa, Tanzania's central region, Hull in Britain and South Florida in the United States.
The group calculated that Maharashtra alone could lose between $370 million and $570 million a year from drought by 2030, but climate resilience measures could reduce that by 80 percent.
Hull could suffer an annual loss of over $50 million from flooding, storms and rising sea levels. This could be partially avoided by new engineering and policy measures, as well as insurance.
(Reporting by Nina Chestney; Editing by Anthony Barker)