Climate change is already impacting the Australian economy and the effects are only going to get worse, according to new modelling released by the Climate Council on Thursday.
The Climate Council has modelled the economic impacts of the current Federal Government’s current approach to climate change, finding that a lack of action on climate change “is a major threat to Australia’s financial stability, and poses substantial systemic economic risks”.
According to the report prepared by climate scientists and economists and commissioned by the Climate Council, Australia’s Gross Domestic Product has already been reduced by 1% due to the impacts of severe droughts.
The report comes in the midst of an election campaign that has featured both the costs of climate change action and the impacts of policies on property prices as key campaign issues. The Coalition has sought to attach a price tag of up to $560 billion from Labor’s 45 per cent target, in highly questionable modelling, but has dodged questions about the impact of not acting.
The issue featured prominently in the final leaders debate between Scott Morrison and Bill Shorten, with the leaders challenged on their respective climate policies.
Labor has faced questions about the cost of their policy to reduce emissions by 45% by 2030, but Mr Shorten labelled those questions as a “crooked charlatan’s argument” when costs of action are considered in isolation from the potential costs of not acting at all.
The report from the Climate Council ties these two issues together, by confirming that a lack of action on climate change will significantly impact the Australian economy, with the property and agricultural sectors at particular risk.
The Climate Council report models the expected economic impacts of the Coalition Government’s current approach to climate change, finding that the resulting impact on the Australian economy will be significant, with the property market vulnerable as a result of increasing flooding and sea inundation.
“The property market is expected to lose $571 billion in value by 2030 due to climate change and extreme weather, and will continue to lose value in the coming decades if emissions remain high,” said climate risk expert and report author, Dr Karl Mallon.
“Some Australians will be catastrophically affected by climate change. Low-lying properties near rivers and coastlines are particularly at risk,” Mallon said.
Property insurance will also become increasingly less affordable for property owners, as the impacts of climate change will inevitably lead to higher insurance premiums. The report found that there is a genuine risk that rising costs will effectively make homes uninsurable.
“Increasingly, Australians are also going to struggle to pay for home insurance. On current trends, by 2030, one in every 19 property owners faces the prospect of insurance premiums that will be effectively unaffordable,” Dr Mallon said.
“Even for Australians who can afford to pay, general insurance currently does not cover damage from coastal inundation and erosion: events which are likely to become more common because of climate change.”
Reduced productivity in lost labour and agricultural production has been projected to reach $19 billion by 2030, and will grow to losses of $211 billion by 2050.
Economic impacts of climate change were also predicted for Australia’s agricultural sector. The report found that the Murray-Darling Basin and the Western Australian Wheat belt are particularly vulnerable.
Half of Australia’s irrigated agricultural production is located in the Murray-Darling Basin region, producing water intensive crops of cotton, rice and dairy.
Production is expected to halve by 2050 due to the impacts of climate change, a sector that currently contributes $7.2 billion to the Australian economy annually.
Wheat yields from the Western Australian wheat belt, which produces half of Australia’s total wheat production, were also predicted to fall by 41% to 49% by 2090 if greenhouse gas emissions remain on their current trajectory.
“Detailed new modelling, based on Australia’s current approach to climate change, and global trends, finds the economic damage to Australia’s agricultural sector will also be significant,” said report author and University of Melbourne economist, Professor Tom Kompas.
“If emissions were to continue at current levels, cumulative damages to both agriculture and labour productivity over the next 80 years would cost the economy more than $4 trillion. This is not a trivial figure — it is more than double Australia’s current Gross Domestic Product.
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