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The climate emergency is not an abstraction to be dealt with in the future, nor is it an emerging threat, it is a reality that has arrived. With that reality comes a cost. As the tangible consequences of the climate emergency are unfolding, it is crucial we recognise the immense cost of inaction. This is not only environmental but poses equally significant economic and social risks.

With most change, it is often the way that the pain of staying the same has to be more than the discomfort of change. We are now beginning to feel the pain of staying the same.

The Escalating Cost of Natural Disaster and Extreme Weather Events

As the tide of news is swept from one disaster to another, extreme weather events are becoming the norm rather than the exception. The frequency and severity of these events are increasing each year – extreme wildfires have more than doubled in the past two decades – and with them comes increasing desensitisation to the colossal impact they have on the lives of the people affected, our societies, and economically. The sheer scale of the financial cost of these events is staggering.

• January 2025 – LA Wildfires: Damages were initially set to cost $135 billion, with AccuWeather later estimating the total cost could reach $250-$275 billion.
• November 2024 – Valencia Floods: Around 90,000 vehicles, 4,500 businesses, and 90 schools were damaged or destroyed. The initial costs were estimated at €31.4 billion.
• October 2024 – Hurricane Helene: North Carolina was faced with a minimum of $53 billion for the destruction caused by the hurricane.

These events, the damage inflicted and the cost of repair, illustrate keenly the necessity for robust action. It is not sustainable to keep footing the bill of inaction. The financial toll of these disasters will only increase and further strain national economies, disrupt communities, and destroy livelihoods.

Global Financial Stability at Risk

A recently published report by the Institute and Faculty of Actuaries (IFoA) and the University of Exeter warn that global GDP could halve within a generation without decisive climate action. The report indicates that climate-induced disasters are increasingly likely to trigger widespread panic in financial markets.

This is echoed by the Financial Stability Board (FSB), who warn that the damage of ‘climate shocks’ will engender a downturn in investor confidence and a pullback from lending. These shocks materialise through abrupt changes in policies, technological innovation and consumer preferences, or through the materialisation of physical hazards, such as floods, droughts, storms, or wildfires. They affect financial institutions’ ability to manage risks and to continue to provide financial services in impacted sectors and geographical areas.

As our climate becomes increasingly unstable, so too will our markets, and only significant climate action can precipitate more stability and economic certainty. Proactive steps towards net zero are essential to safeguard our economic future and prevent catastrophic financial instability.

Political Regression and Policy Shift

President Trump’s withdrawal from the Paris Agreement has been overwhelmingly condemned by global leaders. There remains collective commitment to climate action internationally, with prominent leaders emphasising resolve to combat climate change despite political headwinds. Ed Milliband has warned Trump that net zero is “unstoppable”.

The shift towards clean energy is essential to reduce reliance on volatile and unsustainable markets – the broad political landscape does reflect the growing consensus that the path to sustainability is a non-negotiable for future stability.

The Business Imperative to Act

Businesses play a pivotal role in driving climate action and forging a sustainable future. Leading companies like IKEA help to set the example that recognising and adapting to climate change does not equate to economic loss.

At the Davos summit, IKEA’s Ingka Group CEO emphasised that governments and businesses must accelerate their efforts to tackle the climate emergency saying, “There is still a myth out there that adapting to mitigate climate change will be an economic loss, in IKEA we have found that is absolutely the opposite”.

IKEA has invested €9 billion to fuel their transformation to renewable energy as their Chief Sustainability Officer describes planning for the future, “This investment means we can progress further and faster with our plans – and we know it will pay off in the long term”.

The Ripple Effect of Inaction and Embracing the Path to Net Zero

The cost of not pursuing net zero extends beyond immediate financial losses. It affects every facet of society, from public health to global security, our quality of life to our financial security. It creates deepening fractures in our already creaking institutions and fosters furthering socioeconomic global inequality. Extreme weather events lead to displacement of people, food and water shortages, and heightened geopolitical tensions. The burden of these challenges falls disproportionately on vulnerable populations, exacerbating inequalities, and hindering social progress.

The path to net zero is not just an environmental necessity but a strategic economic imperative, and a bridge to cross divisions. Investing in clean energy, sustainable technologies, and resilient infrastructure can drive innovation, create jobs, and ensure long-term prosperity. The transition to a low-carbon economy presents opportunities for growth, leadership, and harmony on the global stage.

The reality is that the climate emergency has arrived; it is for us to meet it now.

At The Carbon Literacy Project, we believe that education and awareness are foundational to this transition. By equipping individuals and organisations with the knowledge and tools to take meaningful climate action – to live the solution to the climate emergency – we can collectively navigate the challenges and seize the opportunities that lie ahead.