Damage control

Reducing the costs of climate impacts in Canada

Download the Report

Climate change is dragging down Canada’s economy and making life less affordable.

The final report in our Costs of Climate Change series—Damage Control: Reducing the Costs of Climate Impacts in Canada—is the most comprehensive assessment to date of how the impacts of accelerating climate change are damaging Canada’s economy, and putting people’s lives, well-being, and prosperity at risk.

The report also shows that proactive adaptation measures and reducing emissions can cut those costs by three-quarters.

CLIMATE damages ARE AN ECONOMIC DRAG

Climate change will reduce economic growth at both the national and sector levels, straining government budgets, reducing household income, and eroding Canada’s competitiveness. 

While the topline macroeconomic losses from climate impacts are concerning, actual costs for people in Canada are even more severe. These household impacts, obscured in the hit to national gross domestic product (GDP), are a classic case of the broken window fallacy, which describes the distorting effect of spending to repair destroyed assets. Such forced spending carries with it an opportunity cost, as expenditures are being directed towards fixing what has been broken, rather than towards new productive activities that create wealth.

CLIMATE DAMAGES HIT HOUSEHOLDS HARD

Our findings show that life will become less affordable for households as economic growth slows, governments are forced to raise taxes to pay for climate disasters, job losses increase, and goods become more costly because supply chains are disrupted. 

GDP could fall by 12 per cent by the end of the century compared to a stable-climate scenario, but the outlook for households is even bleaker, with incomes potentially falling by 18 per cent.

CLIMATE DAMAGES WORSEN INEQUALITY

All households will be worse off in both low- and high-emissions scenarios, with low-income households the most affected. The median income group will see a 19 per cent income loss by end of century in a high-emissions scenario, and the lowest-income households will see a 23 per cent loss.

WE CAN LIMIT THE DAMAGE

While climate damages are already costing Canada’s economy and making life less affordable, investing now in proactive adaptation measures can cut the costs of many climate damages in half in both low- and high-emissions scenarios. If global emissions reductions in line with a low-emissions scenario are achieved, the total costs could be cut by three-quarters. 

Both adaptation policy to prepare for climate damages and mitigation policy to reduce emissions are crucial to limiting future costs and protecting households.

adaptation pays for itself many times over

Our analysis shows that proactive adaptation measures have major economy-wide benefits. For every $1 spent on adaptation measures today, $13-$15 will be returned in years ahead in direct and indirect benefits.

our recommendations

1. Governments should build climate impacts and adaptation policies into their own economic decision making.
2. Governments should create incentives for accounting for climate damage in private sector decision-making by supporting—and where appropriate, mandating—assessment, mitigation, and disclosure of climate change risks. 
3. Governments should scale up adaptation measures to match the magnitude of the risk Canada faces.
4. Governments should double down on aggressive reductions in emissions.
5. Governments should invest in understanding and preparing for the economic risks of climate change that have not yet been modelled.

DOWNLOAD REPORT

explore the series

Stay connected

Be the first to get the next report from the Institute.

Sign up to receive future research and timely policy insights from experts at the Canadian Climate Institute.