The cost of delaying to invest: A Canadian perspective

The Office of the Superintendent of Financial Institutions, the Bank of Canada, and several key financial institutions recently published a report examining transitional risks to the Canadian economy under various climate change scenarios. However, their results leave an important void with respect to the impact of physical risks and the associated costs of climate change for Canada, such as the loss of biodiversity, sea-level rise, and infrastructure damage due to fires and floods, etc. We fill this void by updating the Dynamic Integrated Climate and Economy model developed by 2018 Nobel Laureate William Nordhaus to project physical damages due to climate change for Canada. Our results illustrate stark differences in physical costs under various warming scenarios, highlighting the importance of taking action to mitigate climate change. We find that undertaking the required investments to reduce greenhouse gas (GHG) emissions more than pays for itself in terms of avoided physical damage alone.