As a result, governments’ annual debt-servicing costs could rise between $137 billion and $205 billion by 2100 under a scenario that sees the planet warm by as much as 5 degrees Celsius (9 degrees Fahrenheit). Honoring the Paris Climate Agreement by following a pathway limiting temperature gains to below 2 degrees Celsius could still see an increase in expenditures of as much as $33 billion.
The additional cost to corporates ranges between $7.2 billion in the best case and $62.6 billion in the worst.
The estimates comes amid warnings by policy makers from around the world that financial markets
are underpricing the risk of climate change
on asset prices, with potentially costly future corrections.
“As climate change
batters national economies, debts will become harder and more expensive to service,” said Matthew Agarwala, co-author from Cambridge’s Bennett Institute for Public Policy. “Markets
need credible, digestible information on how climate change translates into material risk.”
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