Flawed economic models mean climate crisis could crash global economy, experts warn

[littlemissmartypants]

Damian Carrington Environment editor
Wed 4 Feb 2026 19.01 EST

Flawed economic models mean the accelerating impact of the climate crisis could lead to a global financial crash, experts warn.

Recovery would be far harder than after the 2008 financial crash, they said, as “we can’t bail out the Earth like we did the banks”.

As the world speeds towards 2C of global heating, the risks of extreme weather disasters and climate tipping points are increasing fast. But current economic models used by governments and financial institutions entirely miss such shocks, the researchers said, instead forecasting that steady economic growth will be slowed only by gradually rising average temperatures. This is because the models assume the future will behave like the past, despite the burning of fossil fuels pushing the climate system into uncharted territory.

Tipping points, such as the collapse of critical Atlantic currents or the Greenland ice sheet, would have global consequences for society. Some are thought to be at, or very close to, their tipping points but the timing is difficult to predict. Combined extreme weather disasters could wipe out national economies, the researchers, from the University of Exeter and financial thinktank Carbon Tracker Initiative, said.
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https://www.theguardian.com/environment/2026/feb/05/flawed-economic-models-mean-climate-crisis-could-crash-global-economy-experts-warn

[markodochartaigh]

1. Nordhaus won a Nobel Prize in economics

for his estimates of GDP reduction by anthropogenic climate change.


"Nordhaus claimed that 3°C of warming would reduce global GDP by just 2.1%, compared to what it would be in the total absence of climate change. Even a 6°C increase in global temperature, he claimed, would reduce GDP by just 8.5%."


https://www.ucl.ac.uk/news/2020/sep/nobel-prize-winning-economics-climate-change-misleading-and-dangerous-heres-why

I'm not a Nobel winning economist, and I bet anyone reading this comment isn't either, but just search scenarios for 6°C warmer Earth and ask yourself how GDP will only drop by 8.5%.