Climate change has already made Australians in New South Wales significantly poorer, with a median loss of 18% to the state's economy, according to a new report from the Net Zero Commission. This translates to about A$21,300 per person in lost yearly income.
The Economic Impact of Today's Warming
The world's hottest years over the past decade have coincided with stagnant economic productivity, rising prices, and geopolitical instability. But is this just coincidence? Researchers sought to answer how much economic damage the current level of ~1.35°C of warming has already caused.
By analyzing the effects of climate change on the NSW economy—the largest economic jurisdiction in Australia—they estimated median losses of around 18%, with a probability range of 4–33%. At the median, that means about $21,300 per person per year in lost income.
Global Weather, Not Local Disasters, Drives the Damage
Surprisingly, the majority of the damage does not come from local bushfires or flooding, but from changing global weather patterns that affect the cost of living. The interconnectedness of modern economies means climate shocks to supply chains impact the entire globe, much like the downturn following geopolitical conflicts.
How the Study Was Conducted
The research asked: "What would the NSW economy look like today if historical emissions had not caused climate change?" To answer this, scientists collected 70 years of data on economic growth and weather worldwide. They modeled how weather shocks impacted growth and then created a hypothetical weather series without human-caused climate change by removing the trend attributed to greenhouse gases.
Comparing economic growth rates under observed and hypothetical weather conditions revealed the cost of historical climate change. The median loss for 2024 was 18%, with lower estimates around 4% and higher around 33%.
Rethinking Climate Change as an Economic Issue
When pollsters ask Australian voters about their concerns, climate change is often listed separately from cost of living, public health, and employment. This reinforces a misconception that these issues are independent. However, the evidence shows climate change is strongly linked to economic outcomes that drive the cost of living, interest rates, and investment in health and education.
It is time to stop thinking of climate change as merely an environmental issue that can be discarded when economic times are tough. Instead, it should be recognized as a current and ongoing threat to our standard of living.
