Economics

States and financial bodies using modelling that ignores shocks from extreme weather and climate tipping points

Flawed economic models mean the accelerating impact of the climate crisis could lead to a global financial crash, experts warn.

Recovery would be far harder than after the 2008 financial crash, they said, as “we can’t bail out the Earth like we did the banks”.

As the world speeds towards 2C of global heating, the risks of extreme weather disasters and climate tipping points are increasing fast. But current economic models used by governments and financial institutions entirely miss such shocks, the researchers said, instead forecasting that steady economic growth will be slowed only by gradually rising average temperatures. This is because the models assume the future will behave like the past, despite the burning of fossil fuels pushing the climate system into uncharted territory.