Flawed Economic Models Mean Climate Crisis Could Crash Global Economy, Experts Warn

As the world grapples with increasingly severe climate events, experts are raising alarms about the long-term implications of the climate crisis on the global economy. A growing body of research suggests that current economic models—rooted in concepts of infinite growth, consumerism, and exploitation of finite resources—are dangerously inadequate for addressing the impacts of climate change. These models, experts warn, could very well lead to economic collapse if the global community fails to radically rethink its approach to growth, development, and environmental responsibility.
The idea that economic growth can continue unabated, regardless of environmental limits, has been the guiding principle for policymakers and financial systems for decades. But, as climate-related disasters worsen and ecosystems teeter on the brink of collapse, the traditional economic paradigms are beginning to show cracks. According to a group of leading economists, the climate crisis is not just an environmental issue but an existential economic one, with the potential to cause widespread disruption and even a systemic collapse of the global economy.
The Flaws of Current Economic Models
At the heart of this concern lies the unsustainable nature of economic models that prioritize continuous growth at all costs. Most global economies, particularly in developed nations, are built on the assumption that resources—whether fossil fuels, land, or raw materials—are plentiful and that consumption can keep rising indefinitely. This assumption is fundamentally flawed, as it overlooks the fact that the Earth’s resources are finite and that the degradation of these resources, caused by unchecked exploitation, will inevitably create severe economic and social consequences.
The economic models that dominate global finance also tend to disregard the long-term impacts of environmental degradation, focusing instead on short-term profits and GDP growth. This has resulted in policies that subsidize industries responsible for massive carbon emissions, such as fossil fuels, agriculture, and manufacturing, while undermining efforts to transition to a more sustainable economy. Furthermore, these models ignore the reality of climate risks—natural disasters, droughts, floods, and rising sea levels—which are already disrupting production, trade, and infrastructure in many parts of the world.
In an interview with The Guardian, Dr. Elizabeth Gannon, a professor of environmental economics, pointed out, “We are building economic systems based on the assumption that we can continue consuming the planet’s resources indefinitely. But climate change is making it clear that this is not only unsustainable—it’s catastrophic.”
How Climate Change Will Impact the Global Economy
The economic impacts of climate change are already being felt across the globe, from supply chain disruptions to increased insurance premiums and infrastructure damage. Economists predict that the effects will only intensify, with some arguing that climate change could trigger a new global recession or even an economic collapse.
One of the most immediate threats is the disruption of global supply chains, particularly in industries that rely on agricultural production and natural resources. Rising temperatures, extreme weather events, and changing precipitation patterns are already wreaking havoc on crop yields, especially in regions like sub-Saharan Africa, Southeast Asia, and parts of South America. This is likely to lead to food shortages, which will further increase prices and contribute to global inflation.
In addition to agricultural disruptions, rising sea levels and stronger storms threaten coastal cities, where many of the world’s economic hubs are located. In the United States alone, cities like Miami, New York, and New Orleans are experiencing the effects of rising sea levels, while European cities like Venice and Rotterdam are also at risk of flooding. This type of infrastructure damage not only disrupts local economies but also has broader ramifications for global trade, as many ports and shipping routes are located along coastlines.
The economic risks of climate change are not limited to physical damage. Financial markets are increasingly recognizing the long-term risks of climate-related disasters, and investors are beginning to pull out of industries that are seen as vulnerable to climate change. The fossil fuel industry, in particular, is facing growing divestment, with major investors shifting their portfolios to more sustainable assets. As a result, oil, gas, and coal companies are facing financial instability, and entire sectors of the global economy are at risk of collapsing or being dramatically transformed.
Reimagining Economic Models for Sustainability
Given the urgency of the situation, many economists and environmentalists are calling for a complete overhaul of current economic models. One prominent proposal is the idea of degrowth, which suggests that economies should intentionally scale back production and consumption in order to reduce environmental impacts and prioritize long-term sustainability over short-term profits. Advocates of degrowth argue that the obsession with endless GDP growth has led to a crisis of overconsumption, resource depletion, and ecological collapse.
Other proposals focus on the concept of a circular economy, which seeks to eliminate waste and promote the reuse and recycling of resources. In this model, products are designed with sustainability in mind, and industries work to create closed-loop systems where materials are reused instead of disposed of. A circular economy would reduce reliance on raw materials and minimize the environmental footprint of manufacturing and production.
At the policy level, governments would need to implement robust regulations to curb carbon emissions, incentivize renewable energy adoption, and invest in green infrastructure. Carbon pricing mechanisms, such as carbon taxes or cap-and-trade systems, would encourage businesses to internalize the environmental costs of their operations and shift toward more sustainable practices. The transition to a low-carbon economy would also require large-scale investments in clean energy technologies, public transportation, and sustainable agriculture.
In her recent speech at the United Nations Climate Change Conference, UN Secretary-General António Guterres stressed the importance of transforming economic models to prevent climate catastrophe: “The climate crisis is a financial crisis. The time to change our economic systems is now, before it’s too late.”
Conclusion: A Path Forward
The climate crisis presents a clear and present danger not only to the environment but to the global economy itself. As climate-related disasters intensify, experts warn that the current economic models, which are based on unsustainable growth and resource depletion, could crash the global economy. The time has come for radical reform—one that prioritizes sustainability, equity, and long-term resilience over short-term profits.
While the path to a sustainable economy will not be easy, the alternative—economic collapse, widespread poverty, and environmental ruin—is far worse. By embracing new economic models and shifting our priorities, we can mitigate the impacts of climate change and build a future that works for both people and the planet.