Climate change 3/3: Is the current path the right one?

In the final article on climate change, we will focus on the economic rationale for investments related to climate change. Opponents of sweeping climate measures argue that decarbonisation is costly and curbs growth. Supporters, by contrast, argue that inaction would be far more costly – it is just that these costs are not immediately visible; they will emerge in future damage and can currently be seen mainly in externalities. Economic studies and models exist that seek to quantify how much climate change will cost if we do nothing, but precise quantification is virtually impossible.

The enormous cost of inaction vs. the cost of transition

For example, the well-known Stern Review estimated as early as 2006 that failure to take action could cost the world more than 5 % of GDP annually (up to 20 % of GDP annually in a pessimistic scenario), while the cost of reducing emissions was estimated at around 1 % of GDP annually. More recent analyses using macroeconomic models reach similar conclusions. For example, research by the University of Cambridge in cooperation with BCG (2025) states that allowing warming to rise to around 3 °C by 2100 would reduce cumulative global GDP by 15–34 % (compared with a scenario in which warming is limited). Conversely, investments of approximately 1–2 % of GDP in mitigation and adaptation could keep warming at around 2 °C and limit economic damage to "only" 2–4 % of GDP [1]. In other words, every crown invested in time will pay back many times over in avoided damage, although some damage will no longer be preventable.

The report summarises this by saying that the net "cost of inaction" amounts to a loss of 11–27 % of cumulative output – equivalent to three times global healthcare spending or eight times the amount needed to eradicate extreme poverty [2]. The Intergovernmental Panel on Climate Change (IPCC) reaches similar conclusions, stressing in its latest synthesis report that with every additional increment of warming, damage and risks to human society rise exponentially[3].

It is true that quantifying these impacts is difficult and subject to uncertainty – how can human lives, lost biodiversity or armed conflicts triggered by resource stress be quantified? Nevertheless, the trend is clear: the costs associated with the impacts of the climate crisis (floods, hurricanes, droughts, migration, etc.) will run into trillions of dollars annually unless climate change is kept from the worst-case scenarios. Extreme weather is already causing enormous economic losses – for example, Hurricane Ian (2022) cost the US an estimated $113 billion, the 2022 European droughts reduced yields and drove up food prices, while the 2019–20 Australian bushfires caused not only direct damage but also health impacts due to air pollution, etc. Added to this are health impacts (the 2022 European heatwave claimed around 70,000 lives, and some scientists attribute it directly to climate change [4].

Overall, climate change has the potential to significantly destabilise the global economy and global stability – which is why investments in prevention (mitigation) and preparedness (adaptation) are economically highly justified.

Are current measures enough?

The European Green Deal represents one of the most comprehensive strategies for addressing the climate challenge. It places emphasis on rapid decarbonisation and believes in innovation that will deliver clean economic growth. Nevertheless, it has sparked debate about the right balance between costs and benefits, between European leadership and the need for global collective effort. Will the current path be enough? It may sound heretical to have doubts when science clearly says that we must reduce emissions as quickly as possible. But the point is rather to ask how best to use limited resources and time. Should the EU also put more pressure on international diplomacy to bring other major emitters on board? Is adaptation, which will be essential regardless of the success of mitigation, being neglected? And what about new technologies, from fusion energy and carbon storage to the aforementioned geoengineering concepts – does it make sense to invest in them as insurance?

What is certain is that there is no simple way out of the climate crisis. We will have to transform at least the energy sector and industry, while also strengthening the resilience of cities and landscapes. The Green Deal is only one piece of the puzzle; whether it will be enough to avert the worst scenarios also depends on many external factors. We may face a course correction – a reassessment of the pace or means of achieving the goals, or an expansion of the strategy to include new elements (for example, a major programme supporting adaptation strategies). As the impacts of climate change become increasingly apparent, pressure on political leaders will also grow, and they will have to take measures to mitigate the impacts of climate change. And if conventional measures fail, more radical and less orthodox approaches to averting the effects of climate change can be expected – after all, more than enough dystopian examples have already been portrayed in films.

The point, then, is not to abandon climate goals, but to find the right path forward. The discussion should remain open. Can we protect the climate while maintaining a strong economy and social cohesion? Is the European path an example worth following, or rather a warning against haste? And what do you think – is the Green Deal the right path, or would you propose a different approach to tackling inevitable climate change? The debate continues.