A study by the Potsdam Institute for Climate Impact Research predicts that climate change will reduce global income by 19% in the next 25 years.

The study predicts that climate change’s annual economic impact will reach $38 trillion by 2049, with the financial cost potentially exceeding previous estimates by 2100.

Researchers highlight extreme weather as the biggest climate impact, but average warming drives overall impacts, harming crops and hindering labor production.

The study reveals that the US and Europe are most severely affected, with the poorest nations experiencing a 61% greater loss in income than the richest. This highlights the need for financial adaptation to rising temperatures.

The study uses computer simulations to analyze historical economic effects on GDP per person worldwide. It suggests that reducing carbon emissions now is highly beneficial due to heat-trapping gases’ build-up, despite fixed economic costs for the next 25 years.

“Our analysis shows that climate change will cause massive economic damages within the next 25 years in almost all countries around the world, also in highly-developed ones such as Germany and the U.S., with a projected median income reduction of 11% each and France with 13%,” said study co-author Leonie Wenz, a climate scientist and economist.

According to lead author Max Kotz, a climate scientist, climate change damages are compared to no-climate baseline and against global GDP growth, indicating income growth is 19% less globally, but not as much due to warmer temperatures.

Kotz said that the financial impact on global income would remain at 20% if carbon pollution were to be reduced and global warming kept to a maximum of 2 degrees Celsius (3.6 degrees Fahrenheit) over pre-industrial times, as stipulated by the 2015 Paris Climate Agreement. In the worst-case scenario, however, he said, the financial damage will be closer to 60% if emissions rise.