Climate crisis: Global supply chains face $25 trillion in losses 

A new study led by King’s College London reveals the profound implications climate change is poised to have on global supply chains, potentially stagnating economies worldwide over the next forty years. 

This research highlights the vulnerability of manufacturing-dependent giants like China and the US, which stand to bear the brunt of supply chain disruptions triggered by climatic phenomena, regardless of their geographical remoteness from the events themselves.

Indirect losses of global supply chains

This seminal work marks the first comprehensive effort to map out the “indirect economic losses” global supply chains face due to climate change, particularly affecting regions previously deemed less susceptible to the adverse effects of rising global temperatures. 

The findings project an exponential growth in global GDP losses attributable to these indirect impacts, emphasizing the expanding economic toll as climate change intensifies. 

Previously unquantified disruptions 

Such previously unquantified disruptions in supply chains will increasingly exacerbate projected economic losses due to climate change, leading to a projected net economic loss of between $3.75 trillion and $24.7 trillion by 2060.

“The way heat stress-related costs emerge demonstrates how extensive and diverse impacts from heat stress are propagated through global supply chains, resulting in economic losses to a country or sector that may not be immediately apparent,” said co-lead author Daoping Wang from King’s College London’s Department of Geography, School of Global Affairs.

Cascading effects throughout global supply chains

The researchers delved into both direct and indirect economic disruptions attributable to climate change, including health-related costs stemming from heat exposure and operational interruptions due to excessive heat, alongside the cascading effects these disruptions have throughout supply chains. 

The study estimates a projected net economic loss ranging between $3.75 trillion to $24.7 trillion by 2060, influenced by varying levels of carbon dioxide emissions.

Interconnectivity of the modern global economy

Highlighting the intricate interconnectivity of the modern global economy, the study illustrates how disruptions in one locale can have ripple effects across the globe, affecting regions in often unpredictable ways. From crop failures to labor slowdowns, the impact on raw material supplies can disrupt manufacturing and trade across distant regions.

Regions in South-Central Africa and economies reliant on international trade, such as Brunei, face disproportionate risks, with the former grappling with increased mortality from heatwaves and the latter with indirect losses. 

This study is a pioneering effort in analyzing and quantifying the widespread disruptions climate change poses to global supply chains and their economic ramifications.

Economic losses will rise exponentially with global warming

According to Wang, as the planet continues to warm, the worse off economically it will become, with compounding damage and economic losses rising exponentially the hotter it gets, a situation highlighting the need for global collaborative efforts in adapting to extreme heat.

The study’s projections, based on three “Shared Socioeconomic Pathways” or SSPs, indicate significant economic losses across all scenarios, with the most severe impacts under the highest emissions path. By 2066, total GDP losses could reach 0.8% under 1.5 degrees of warming, escalating to 3.9% under a 7 degrees warming scenario.

Everywhere is at economic risk

“These projected economic impacts are staggering. These losses get worse the more the planet warms, and when you factor in the effects on global supply chains it shows how everywhere is at economic risk,” stated project leader Dabo Guan, a professor of climate change economics at Tsinghua University in Beijing.

The study not only highlights the stark economic implications but also underscores the dire human costs associated with climate change, from increased heatwave mortality to production losses due to labor disruptions. 

“The indirect losses of heat stress highlight the need for countries to strengthen collaboration across global relevant supply-chains. For instance, our results demonstrate that the impact of a heatwave on the agriculture and food manufacturing industry in India will also impact the US food manufacturing industry severely.” 

“If the USA were to support India’s adaptation efforts through technology transfer, they would indirectly be reducing their own losses,” Dr. Wang concluded, advocating for global cooperation in climate change mitigation and adaptation efforts.

The study is published in the journal Nature.

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