A new comprehensive report by the Boston Consulting Group (BCG) warns that failing to address climate change could slash global economic output by 34% this century, presenting a dire economic forecast. The research, which was conducted in partnership with the University of Cambridge, relies on extensive analysis of climate science data and provides alarming insights into the future of economies worldwide.
Kamiar Mohaddes, an Associate Professor in Economics & Policy at Cambridge Judge Business School and co-author of the report, emphasizes a crucial takeaway: productivity loss, rather than mere destruction of capital, will primarily drive economic damage as climate issues progress. “What stands out is that productivity loss — not merely capital destruction — is the primary driver of economic damage,” he states.
This report indicates that the ramifications of climate change will not be confined to traditionally vulnerable sectors such as agriculture but will bleed into every corner of the world economy. “It is also clear that climate change will reduce income in all countries and across all sectors, affecting industries ranging from transport to manufacturing and retail, not only agriculture and other sectors commonly associated with nature,” Mohaddes explains.
The economic imperative for proactive climate action comes sharply into focus with the report's analysis of economic losses attributed to climate-related natural disasters. Between 2000 and 2023, the direct financial toll on the U.S. reached $700 billion, while the associated productivity losses ballooned to nearly six times that figure, totaling $4 trillion. With the potential for global temperatures to rise by 3°C this century, the consequences could prove devastating for billions, with industries like fishing and tourism standing on the brink of collapse.
Yet, amidst these alarming findings, the research does not shy away from offering hope. According to BCG, if strategic investments of less than 2% of global GDP are made, most of these projected economic losses could be mitigated. Annika Zawadzki, Managing Director and Partner at BCG and report co-author, asserts, “The economic case for climate action is clear, yet not broadly known and understood.”
By increasing investments in emissions reductions nine-fold and adapting measures thirteen-fold, the world could limit warming to 2°C and cut economic damage by up to 90%. Zawadzki believes that this could yield an astonishing return of around tenfold by 2100. “Investment in both mitigation and adaptation could bring a return of around tenfold by 2100,” she remarks.
This financial return can transform global prospects, as merely an eightieth of the anticipated savings, estimated at $324 billion, could eradicate extreme poverty globally. Furthermore, just a fraction of these savings could satisfy the century's global infrastructure investment needs across essential sectors like energy, telecommunications, and water. In fact, the potential exists to triple global healthcare spending or even fund all military expenditures until 2100 using just a small portion of the financial benefits generated by these investments.
“The message is clear: invest today or watch the costs rise tomorrow,” the report underscores, presenting five pivotal steps to trigger widespread action in combating climate change. Key recommendations include reframing the climate debate to emphasize economic costs, enhancing transparency around the net cost of inaction, fortifying national climate policies, reviving international cooperation, and promoting understanding of climate change’s cumulative economic impacts.
This BCG-Cambridge analysis harmonizes with recent forecasts from financial analysts, including a January report from the Institute and Faculty of Actuaries (IFoA), which warns that unchecked climate change could potentially lead to a staggering 50% decrease in global GDP between 2070 and 2090.
As the world gears up for the COP30 climate summit in Belém, Brazil, in November 2025, reports like these bring to the forefront that climate action must be perceived not only as an environmental necessity but as an economic priority. They indicate that the transformations prompted by proactive climate strategies could bring about lasting prosperity and resilience for generations to come.
In a related development, the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme recently released their analysis highlighting that well-crafted climate policies could raise global output. Their March 25, 2025, report indicates that implementing accelerated climate action could enhance global GDP by 0.2% by the year 2040. This increase mirrors the output of a small economy, comparable to that of Sweden.
As ministers from around 40 countries convene in Berlin for the Petersberg Climate Dialogue, the dialogue will work toward setting an agenda for the upcoming COP30 summit by focusing on effective climate strategies. Investments in clean energy and efficiency not only curtail emissions but have the potential to foster productivity and innovation, thereby offsetting the economic impact of policy adjustments.
Significantly, the OECD report warns that unclear climate policies might hinder private investments and could cut GDP by as much as 0.75% by 2030, signaling a need for clear, decisive action.
Meanwhile, on March 26, 2025, China announced plans to further expand its carbon trading market to include major industries such as steel, cement, and aluminium smelting. This move will require an additional 1,500 firms to acquire credits to manage their emissions, illustrating a globally significant step towards addressing climate change.
German Foreign Minister Annalena Baerbock emphasized the importance of these discussions, remarking that dismissing climate action merely as an expense is myopic in these turbulent times. During the Petersberg Climate Dialogue, she stated, “Anyone who dismisses climate action in these turbulent times as being expensive, onerous or superfluous cannot count.” The agenda for this conference will delve into continuing the global commitment made at the 2023 climate summit in Dubai to transition away from fossil fuels and to substantially increase global renewable energy capacity by 2030.
As discussions unfold in Berlin and the world anticipates COP30, the financial stakes have never been clearer: immediate, coordinated action on climate change is essential to avert profound economic hardship while seizing transformative opportunities.
