The Economics of Climate Change: Assessing the Costs of Inaction and Policy Alternatives

Abstract

Climate change presents severe economic challenges, with potential costs ranging from reduced agricultural productivity and health crises to infrastructure damage. If left unaddressed, the economic impact of climate inaction could lead to an estimated global GDP reduction of up to 18% by 2050. This paper examines the financial consequences of ignoring climate risks and contrasts them with the investment required for proactive policies. It highlights carbon pricing, renewable energy subsidies, and adaptation strategies as essential tools for mitigating economic damage. By using case studies and recent data, the analysis reveals that early intervention, though requiring significant financial commitment, is far more cost-effective than the long-term expenses of climate-induced disasters. Global cooperation, particularly through initiatives like the Paris Agreement, is critical to ensure that developed and developing nations alike can implement these solutions. The paper concludes that taking immediate and decisive action on climate change not only protects the environment but also safeguards global economic stability.