A new study has found that climate change could cut the world’s economy by 40%, and SA’s GDP by as much as 45% by the end of the century — more than three times previous estimates.
The research, titled “Reconsidering the macroeconomic damage of severe warming” and led by Dr Timothy Neal, an Australian economist and senior lecturer at the University of New South Wales, argues that traditional economic models have underestimated climate damage by focusing only on local weather events.
Neal’s team introduce a crucial correction: global climate shocks must also be considered, since economies are deeply interconnected through trade and supply chains.
“The big missing link here is that you’re ignoring what the weather is everywhere else in the world at the same time,” he told Business Day.
While one country experiencing bad weather might usually rely on imports from others with better conditions, future climate change raises the risk that multiple countries will experience extreme weather simultaneously — limiting their ability to help each other and compounding economic fallout. This would lower global growth.
“The number of countries that experience what we consider to be bad weather goes up, and the number of countries that experience what we now consider to be good weather goes down,” he said.
“So now, more countries are experiencing bad weather at the same time, and this is what can have dramatic implications for global markets. This is what can result in spikes in the price of food when countries are hit simultaneously by bad weather.”
Using three major economic damage models, Neal and his colleagues found that factoring in global weather volatility more than doubles, and in some cases triples, projected economic losses.
If global temperatures climb beyond 3°C by the end of the century, the updated model suggests that economic losses (global average) could reach 40% — a steep increase from the roughly 11% projected by earlier estimates.
For SA, the cost rises sharply, too. Without factoring in global weather, SA would be likely to lose about 13% of GDP. This jumps to 45% under a severe warming scenario that includes global weather conditions, the study shows.
“The reason why SA would be slightly worse than the global average is because it’s a warmer country,” Neal said.
Exports account for about a third of SA’s GDP, and sectors such as agriculture, mining and manufacturing depend heavily on access to foreign markets. SA also imports a range of essential staples, including rice, wheat and some poultry products. The overall value of agricultural imports in 2024 was R136.3bn.
Other top import categories include mineral fuels, oils, and distillation products; machinery, nuclear reactors, boilers, vehicles and automotive parts, and electrical and electronic equipment.
SA farmers may be more severely affected by climate change than competitors in cooler regions like Canada or Europe, reducing their global competitiveness.
“There’ll be, even in the best case, somebody paying a higher price for food,” Neal said.
Lower global growth from future climate change will ultimately affect all consumers and producers in SA, “especially when you have a country where a significant number of people earn low incomes”, Neal said.
“They are already spending a significant amount of their budget on basic necessities, and if they get badly affected by climate change, they will look to the government for more support.”
The study also found that certain countries would be much worse off than previously expected. Older models suggested that colder regions like Russia or Northern Europe might benefit from warming. Neal strongly dismisses that.
“This whole idea is crazy — that some countries can benefit or will be unaffected by climate change — but that has been the result of a number of economic models,” he said.
“What that does is encourage complacency by the richest countries on the planet… If they start seeing it as an altruistic issue, nothing’s going to happen,” Neal said, referring to developed countries taking responsibility for emissions-driven climate change.
He explains that even if future warming made parts of Russia newly suitable for farming and boosted crop production, it would also be likely to trigger large-scale migration into those regions, potentially diluting the per capita benefits for Russians as the population rises.
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