Economists underestimate the economic impacts of climate change, which does not encourage either the financial sector or public authorities to invest in reducing carbon emissions, according to the NGO Finance Watch.
“Economic risks related to climate change are currently modeled in the same way as traditional financial risks,” explains Thierry Philipponnat, chief economist at the NGO Finance Watch and author of a report published on Tuesday.
However, “the losses related to climate change will be considerable, unpredictable and permanent.”
Certain climate consequences, such as thawing permafrost or forest fires, will cause economic losses “much greater than those of recent financial crises,” according to the Brussels-based NGO.
A risk of bias in cost-benefit analyzes
As a result, “policymakers’ economic models predict only a benign level of losses from climate change” and their predictions are “highly unrealistic,” the report says.
This undervaluation of impacts runs the risk of “distorting the cost/benefit analyzes” used to design policies to combat climate change and investments in the transition, Finance Watch also denounces.
“And even if the estimates of economic losses are revised upwards, the supervisory authorities of the financial sector do not have the necessary prudential tools to prepare the financial system for these losses,” adds the NGO created after the 2008 crisis to establish a anti-finance lobby.
Finance Watch will positively report the rapport demanded by the European Commission to the European banking supervision authorities, in order to assess the resilience of the financial sector in a scenario of 55% reduction in gas emissions by 2030 in the future. European Union. An “opportunity to help the financial system prepare for the economic effects of climate change,” according to the report.
Source: BFM TV
