2023-10-30 23:01:09
Some are missing the point. Too often, economists are still unable to fully assess the quantified impact of global warming on our societies. Worse, they systematically underestimate it. This is the uncompromising observation drawn up by the new report, published Tuesday October 31 by Finance Watch, “Finance in a hot house world” (“Finance in a burning world”).
“There is a serious disconnect between climate research and the models that shape economic policies”, denounces this non-governmental organization (NGO) which, since 2011, has sought to counterbalance the financial industry lobby. The authors insist: “Current estimates of the economic and financial impacts of climate change paint a surprisingly benign picture. »
The report cites, for example, the work of the Network for Greening the Financial System, the network of around a hundred central banks and supervisors which, since 2017, have been working on the greening of finance, at the initiative of the Banque de France. According to them, a 3.5°C rise in average temperature between now and the end of the century would reduce global production by just 7% to 14%. The Financial Stability Board, an international institution responsible for monitoring and issuing recommendations to strengthen the global financial system, estimates that a rise of 4°C would cause the value of assets to fall by 3% to 10%. %.
“Adapt our economic models”
Estimates that the NGO describes as “unrealistic” and way too low. Reason: economists model climate risks as they do traditional financial risks, and they are wrong, she judges. Because, in doing so, they ignore “the unpredictability, permanence and scale of losses due to climate change”just like tipping points, such as that linked to the melting of permafrost.
However, by underestimating these risks, they encourage political leaders to inaction. “We must adapt our economic models to prevent them from compromising our climate change mitigation and adaptation efforts”explains Thierry Philipponnat, chief economist at Finance Watch.
The report then offers a series of concrete and technical tools, somewhat difficult to follow for the uninitiated. All of them aim to force the financial sphere to more clearly accelerate its greening and to better take into account the reality of future risks. Regulators might, for example, increase the level of capital required of banks that finance fossil fuels too extensively. “Such financial mechanisms might allow us to limit warming to dangerous levels of 1.5°C-2°C rather than catastrophic levels of 3°C-4°C”judges economist Steve Keen, emeritus researcher at University College London, cited by the NGO.
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