Two trillion US$ damage in 10 years

From 2014 to 2023, close to 4,000 recorded extreme weather events resulted in cumulative losses to the global economy of at least US$ 2 trillion for this ten-year period (in 2023 prices), according to a recent study for the International Chamber of Commerce. About 95% of these losses stem from the destruction of physical assets. The remaining 5% represent economic losses linked to early deaths caused by extreme weather events.

The study focused on extreme events such as floods, landslides, storms, cyclones, and wildfires, but also extreme temperatures and droughts. The study reports a 19% increase for 2022 and 2023 compared to the annual average from the preceding eight years. The numbers show annual economic losses for these two years of roughly US$ 250 to 300 billion, of which about 20% representing monetary value of lost human lives.

These numbers are not precise monetary figures but rather a broad indication of the scale of costs due to extreme weather events. The numbers are likely a lower bound estimate of these costs, the authors of this study emphasise. Their study excludes both several indirect extreme weather-related impacts – including, for instance, agricultural and supply chain disruptions – and the risks linked to longer-term shifts in climate patterns, such as rising global temperatures, sea level rise, and changes in precipitation patterns.

To put these numbers into perspective: The annual global investments in infrastructure – including roads, (air)ports, water supply, energy supply and telecommunications – amounted to about US$ 2.8 trillion in 2022.

Not just climate change

The authors suggest that climate change is driving these extreme weather events and the related damage. This is short-sighted, though. ‘Societal change not climate change is the overwhelming cause of increased disaster losses’, was the conclusion from an analysis of 53 studies into economic losses by extreme weather events in the past two decades. Besides, research shows that global vulnerability to climate-related hazards is decreasing, so far. Although the annual number of reported natural disasters has increased sharply since 1980, the annual economic impact and the number of fatalities have increased much less.

Indeed, the cumulative losses to the global economy of around US$ 2 trillion in the past ten years is a broad indication of the scale of costs due to extreme weather events. However, mentioning these numbers in the same breath as the consequences of climate change goes a step too far.

Source: OXERA, 2024. The economic cost of extreme weather events. Report prepared for the International Chamber of Commerce.