Canada will see C$25 billion in losses per from climate damage as early as 2025, with individual households bearing the worst of these costs, finds a new report the Canadian Climate Institute (CCI).
That total will skyrocket to $78 to $101 billion per year by 2050, depending on future greenhouse gas emissions, $391 to $865 billion per year by the end of the century, the institute says in, Damage Control, a macroeconomic study of how climate will affect Canada’s GDP.
The report calls for urgent investments in climate adaptation, with each dollar spent today bringing a return of $13 to $15 over the long term.
“As climate change impacts intensify, life will become even less affordable as economic growth slows, governments will be forced to raise taxes or cut services to pay for climate disasters, job losses will be measured in the millions, and goods will become more costly as supply chains are disrupted,” the CCI writes.
“The mounting costs of climate change will cause severe damage to Canada’s economy, with the worst costs being experienced directly by individual households.”
Those outcomes are not inevitable, CCI says. Investing in climate adaptation now can cut many of the costs in half, and even by up to three-quarters, “if adaptation is paired with Canadian and global success in reducing emissions in line with international commitments.”
CCI identified 16 “impact groups” or areas where climate change is likely to trigger major costs. The list ranges from infrastructure costs like damage to roads, rail lines, and power grids, to health costs like illness and reduced labour productivity. Weather disasters, agricultural yields, forest products, and seasonal tourism were also factored in.
CCI calculated the direct economic costs—or in some cases benefits—for each group, then fed those findings into a model that simulated the repercussions on Canada’s economy through to the end of the century. Then the researchers evaluated the impact of proactive adaptation in reducing economic damages.
The analysis covers 84 scenarios, yet CCI says it reveals only the “tip of the iceberg” when it comes to the full impact of climate change on Canada’s economy and society. Incomes will drop for all households, but low-income households are likely to lose the most, strongly influenced by the effectiveness of emissions reduction policies. Projections show households losing an average of C$720 per capita by 2025 in both high- and low-emission scenarios. Around mid-century, per capita losses hit C$1,890 in a low-emissions scenario, and C$2,300 with higher emissions.
All sectors and regions of Canada’s economy will be affected, with Northern Canada seeing disproportionate losses due to infrastructure damage from thawing permafrost. Those losses threaten to “upend government spending,” with revenues falling just as expenditures increase.
“The result will be a forced choice between raising taxes in order to maintain services, accruing additional public debt, or cutting services, as climate damages consume a greater share of government budgets,” CCI writes.
But immediate, ambitious investments in climate adaptation can help reduce the impact, especially if they’re paired with progress on scaling back emissions. The benefits of adaptation include $5 to $6 per dollar spend avoiding direct damage to infrastructure and fending off repair and replacement costs. The entire economy will gain from avoiding supply chain disruptions, losses of labour productivity, and lost income due to road delays and damage.
To guide the economy to a lower-risk future, government decision-making should have built-in polices to assess the costs and benefits of climate impacts and adaptions, CCI states. Governments should also encourage the private sector to account for climate risks and mandate those measures when necessary.
Canada must also scale up adaptation measures, taking proactive steps to protect residents’ health, security, and well-being, while slashing emissions and funding research on climate-related economic risks.
“While governments should not hesitate to act immediately based on what we know today, they should also invest in further research to better understand and prepare for the full scope of climate impacts and economic risks that lie ahead,” CCI says.