Economic impact of melting glaciers

The United Nations Environment Program (UNEP) warns that the loss of freshwater resources from the world’s glaciers could cost the global economy as much as $4 trillion. The social and economic impact of melting glaciers, however, is even broader and calls for decisive action by international financial institutions.

2025 – International Year of Glacier Conservation

The UN General Assembly has declared 2025 the International Year of Glacier Protection to raise awareness among policymakers and the broadest possible public of the need to quickly and proactively address the loss of the Earth’s ice caps. And since nothing appeals to the imagination better than the threat of lost benefits, UNEP has prepared a summary of the expected economic consequences that will affect global society if a black scenario unfolds.

The projected effects of melting glaciers include primarily:

• A $4 trillion reduction in global GDP due to reductions in freshwater resources, which will particularly threaten the agriculture, energy and tourism sectors;
• Reduction of economic productivity in some regions by up to 6 percent of GDP due to water shortages;
• losses to infrastructure and real estate resulting from disasters directly related to glacial melt, including floods, mudslides and rising sea levels.

UNEP identifies Peru, Pakistan and some regions in the European Alps as regions that particularly depend on the supply of fresh water from glaciers. In South Asia, the effects of melting glaciers will be felt primarily in the quantity and quality of crops, which will translate into higher food prices. In the United States, meanwhile, the reduction of snowpack in the Columbia River Basin could reduce hydropower production, resulting in losses of millions of dollars.

Is there actually anything to worry about?

Reports of melting glaciers are so frequent in the media that some members of the public treat them as empty platitudes without seeing the translation into everyday reality. So, as a wake-up call, the International Meteorological Organization (WMO) cited shocking facts in its March press release, reminding that currently 275,000 of the world’s glaciers cover an area of about 700,000 square kilometers and, together with ice sheets, store as much as 70 percent of the world’s fresh water supply.

The rate of melting over the past six years has been dramatic and unparalleled in all recorded history. As a result, in many regions the so-called “permafrost” will not last until the end of the 21st century. The World Glacier Monitoring Service (WGMS) alerts that since 2010, 8 of the 10 highest annual ice mass losses in the world have been recorded. In 2024 alone, the Earth lost 450 billion tons of frozen water, particularly in Scandinavia, the Svalbard Archipelago and North Asia.

Mountain glaciers threaten infrastructure and water security

Particularly noteworthy are mountain glaciers, which function like giant water towers, releasing water stored during winter periods during the warmest and driest seasons. Reduction of their resources will mean a threat to the well-being of hundreds of millions of people living in the catchment areas of rivers flowing from mountain springs, who may run out of water for crop irrigation, energy production, shipping or fishing. In the short term, the accelerated rate of glacier melt means the risk of costly natural disasters such as floods.

Asia has seen a record high loss of ice mass in 2024. In August, 16 walls above the lakes of Nepal’s Thaynbo Glacier collapsed, sending an avalanche of water, ice and rock debris onto the village of Thame, home of the famous Sherpa Tenzing, conqueror of Mount Everest. A school, a local clinic, five hotels and seven houses were destroyed, and half the village is uninhabitable.

In 2023, a similar glacial flood destroyed a $1.69 billion hydropower plant in India, resulting in 42 deaths. Glacial lake outbursts currently threaten the health, lives and property of 10 million people, mostly in Asia and South America.

Global costs are difficult to estimate

The total economic impact of melting glaciers is the result of infrastructure loss, social damage, water shortage costs, but also stunted growth in many industries. According to UNEP, global winter tourism could lose $30 billion by 2050 due to shrinking snow cover in the mountains.

Antarctica is threatened by fishing and tourism, which together generate profits of $1.2 billion. A study published in 2024 in the journal Nature Review even suggests that total economic gains from Antarctica and the Southern Ocean amount to $180 billion a year – the loss of glaciers and the associated consequences for ecosystems and economies could be devastating.

The final balance of losses depends, of course, largely on the further direction of climate change. According to researchers at the London School of Economics and Political Science, in a scenario where_CO2 emissions stabilize at 400 ppm (RCP 2.6), the melting of the Antarctic ice sheet will cost $167 billion a year in 2050. However, if the rate of emissions growth does not slow down (RCP 8.5 scenario), these costs could rise to $201 billion per year.

How can financial institutions mitigate the effects of melting glaciers?

Unfortunately, even in the most optimistic scenario of halting climate change dynamics, the already advanced loss of glacier mass will be a serious economic burden for generations to come. UNEP suggests that it can be minimized by wise strategies by financial institutions that focus on water risk assessment, adaptation investments and support for nature-based solutions to guarantee water security.

Specific suggestions for banks and equity funds include investments in glacier monitoring and early warning systems for glacier threats. Economic pressures from shrinking freshwater supplies from glaciers, meanwhile, could be reduced by sustainable desalination and water recycling technologies, whose market is expected to reach $30 billion by 2030.

In glacier-dependent regions, hydropower plants today provide more than 60 percent of total renewable energy, but the stability of their potential is at risk. As a result, it is necessary to modernize transmission networks and develop adaptive options for hydropower.

Finally, investments in the restoration of mountain ecosystems and reforestation of glacial catchments, which can slow glacier shrinkage, also play an important role. UNEP identifies blue and green bonds focusing on glacier protection projects, stabilizing water security and strengthening the resilience of coastal zones as a key financial tool in this regard.