WEF warns of increased climate change risk

London, 11 January: The World Economic Forum (WEF) has upped its assessment of the risk posed by climate change, estimating that it could cause up to $250 billion of economic losses over the next 10 years.

WEF's assessment of the risk of water shortages, tropical storms and inland flooding was also increased, along with a rash of other potential disasters such as a global pandemic, international terrorism and civil war.

Explaining why it has increased its assessment of the risk of climate change since its last report in 2006, WEF pointed to evidence that carbon dioxide emissions are growing faster than expected.

In a report, Global Risk 2007, also highlights scientific research on 'feedback mechanisms' – whereby the effects of climate change in turn cause global warming to speed up, for example melting icecaps reduce the amount of light reflected back into space, raising temperatures still further.

The Stern Review, a report on the economics of climate change commissioned by the UK government, said that without new preventative measures, the overall cost of climate change could be equivalent to losing 5% of global GDP each year. The World Bank estimated global GDP at $44 trillion in 2005.

But the WEF report, which gives an overview of all the risks facing the world community in the next decade, identifies oil price shock as more likely to occur than climate change in this timeframe. A sharp increase in oil prices could cause up to $1 trillion of economic losses and trigger a global recession, it warns.

"Oil price shock is a risk scenario which can happen at any time," said Jacques Aigrain, chief executive of Swiss Re, which contributed to the report.

"It's not just an increase in the number of risks," said Michael Cherkasky, president and chief executive of Marsh & McLennan Companies. "It's an increase in the potential severity of those risks."

Cherkasky warned of "complacency" over these risks, with governments focusing on their ability to react to disaster, not on reducing the likelihood of one occurring. "As a world community, this is bad business and poor social policy," he said.

Although there are a number of business leaders in this field, he said: "The bulk of businesses are just in the same place as government. Their issue is day-to-day profit and loss."

The report stresses the interconnectedness of these risks, and the lack of capacity in government and the private sector to cope with a series of disasters.

In one scenario, it suggests that climate change could cause a rush for nuclear power, destabilising non-proliferation treaties.

The report recommends that all governments appoint a country risk officer, to take on a similar role as a chief risk officer in a corporation, to give an overview and plan ahead for all risks on the horizon.

"Thinking about individual risks is not as helpful as understanding the systemic [risks]," Sean Cleary, advisor to WEF, said.