How should a cost of 1% of GDP be interpreted?
Our estimates suggest that the costs would rise to around 1% of GDP by the middle of the century. Global GDP is currently around $35 trillion, so if the full 1% were applied to the current period, it would imply around $350 billion in costs. Global GDP is likely to be around $100 trillion by 2050, so this would mean annual costs in the order of $1 trillion by then. These costs are not trivial in absolute terms, but they will not disrupt economic growth. The overall impact can be thought of as equivalent to a one-off increase in the average price level of 1%. Since it may be interpreted as a cost or price index we should see the 1% as applying to either consumption or income. The costs of inaction would be likely to be much more significant in terms of damage to the world economy.
