India faces over $200 billion yearly climate protection bill at 2°C warming: McKinsey

India and Greater China could each face over $200 billion annually in climate adaptation costs through 2050 if the planet warms by 2°C, according to a new report by the McKinsey Global Institute.

Titled Advancing adaptation: Mapping costs from cooling to coastal defenses, the report offers a granular assessment of climate adaptation needs — ranging from heat and flooding to drought and wildfires — using pixel-level geospatial data.

The findings reveal a staggering gap in climate protection. While 4.1 billion people globally are exposed to climate hazards, current spending levels only offer protection to 1.2 billion of them — when measured against developed-economy standards.

India, the report notes, is among the countries with the highest financial burden. “India currently spends about $15 billion a year to defend against extreme weather, yet that spending is about 13% of what’s needed to protect all of the people — 90% of India’s population — living in places currently exposed to at least one of the four hazard categories,” it states.

Even if lower-income countries maintain current protection levels at 2°C warming, they would only manage to cover about 15% of the costs needed to shield their populations effectively, it warns.

India’s steep adaptation bill stems largely from the sheer number of people at risk. “Much of this relatively high total compared with other regions is due to large population exposed to hazards. Yet in India, even the per capita number of $125 per person is more than a third of the amount budgeted to spend per person in its 2025 central government budget,” the report adds.

In terms of implementation, over half the projected costs would fall to private actors — individuals and businesses investing in measures like air conditioning, flood-proofing, and crop shading. Public investments, such as sea dikes and early-warning systems, would account for around 30%, while the remaining 20% would support hybrid initiatives like irrigation systems.