- Climate Change Undermines Economic Growth and Resilience; Climate Action Would Safeguard 11% to 27% of Cumulative GDP by 2100
- The Investment Required in Mitigation and Adaptation Is Equivalent to Only 1% to 2% of Cumulative GDP by 2100
- But Annual Investments Must Rise Ninefold in Mitigation and Thirteenfold in Adaptation from Current Levels by 2050
- Many Costs of Climate Action Fall Before 2050, but the Bulk of the Economic Benefits Will Be Felt After 2050
BOSTON, March 12, 2025 -- There is a strong case for investing in climate mitigation and adaptation based on the severe economic consequences of failure alone. Allowing global warming to reach 3°C by 2100 could reduce cumulative economic output by 15% to 34%. Alternatively, investing 1% to 2% in mitigation and adaptation would limit warming to 2°C, reducing economic damages to 2% to 4%. This net cost of inaction is equivalent to 11% to 27% of cumulative GDP—equivalent to three times global health care spending, or eight times the amount needed to lift the world above the global poverty line by 2100.
These are among the findings of the Boston Consulting Group (BCG), Cambridge Judge Business School, and the University of Cambridge's climaTraces Lab report, Too Hot to Think Straight, Too Cold to Panic: Landing the Economic Case for Climate Action with Decision Makers, published today. The report comes at a time when the importance of economic strength is top-of-mind for many leaders. The report makes clear that climate change slows growth and weakens resilience and, therefore, hinders our collective ability to achieve many of our common priorities from health to security.
"Research on climate change impacts across all regions and sectors is expanding rapidly," said Kamiar Mohaddes, an Associate Professor in Economics and Policy at Cambridge Judge Business School and Director of the University of Cambridge climaTRACES Lab. "What stands out is that productivity loss—not merely capital destruction—is the primary driver of economic damage. It is also clear that climate change will reduce income in all countries and across all sectors, affecting industries ranging from transport to manufacturing and retail, not only agriculture and other sectors commonly associated with nature."
Investment in Climate Action Must Be Front Loaded
Mitigation is the most cost-effective means of reducing the economic damages of climate change; it can return as much as 5 to 14 times the original investment. At the same time, adaptation is critical to minimizing damages, particularly in the next couple of decades. To limit global warming to 2°C by 2100, mitigation investments must increase ninefold and adaptation thirteenfold by 2050. The challenge lies in the timing of climate investments—60% must be committed before 2050, while 95% of the economic damage from inaction would occur after that point.
"The economic case for climate action is clear, yet not broadly known and understood," said Annika Zawadzki, BCG managing director and partner, and a co-author of the report. "Investment in both mitigation and adaptation could bring a return of around tenfold by 2100."
Priorities to Address the Barriers to Action
The report looks at five priority levers to address these challenges:
- Reframe the debate on the costs of climate change
- Create transparency on the net cost of inaction across all actors
- Strengthen national climate policies to accelerate mitigation and adaptation
- Reinvigorate international cooperation on climate change
- Advance our understanding of the net cost of inaction
Download the publication here:
https://www.bcg.com/publications/2025/investing-in-climate-action
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