Limiting the rise to 1.5 degrees could cut the projected economic damage by two-thirds, the authors said.
Warming of the planet by 3 degrees Celsius may cost the world up to 10 per cent of its GDP, a new research has found.
It also found that poorer, tropical countries could see the worst effects - up to 17% GDP loss.
The study - led by ETH Zurich, Switzerland, and published in the Nature Climate Change journal - suggested that roughly half of the predicted global economic damage could be related to extreme heat, with heat waves being the most impactful among the extreme events analysed.
"Impacts are more severe in the Global South and highest in Africa and the Middle East, where higher initial temperatures make countries particularly vulnerable to additional warming," the authors wrote.
The researchers further found that the cost of climate change increased around the world after accounting for changes in rainfall and temperatures occurring within a short span at a location.
"If we take into account that warmer years also come with changes in rainfall and temperature variability, it turns out that the estimated impact of spiking temperatures is worse than previously thought," said doctoral researcher and economist Paul Waidelich from ETH Zurich and lead author of the study.
Limiting the rise of global temperatures to 1.5 degrees Celsius could cut the projected economic damage by two-thirds, the researchers found.
"Some people still say that the world cannot afford rapid decarbonisation but the global economy will also suffer from the impacts of climate change," said Sonia Seneviratne, co-author of the study and a vice-chair of the Intergovernmental Panel on Climate Change's Working Group I.
For the study, the researchers used 33 global climate models and analysed climate indicators related to both greenhouse gas emissions and income growth for the 1850-2100 period. The indicators included yearly average temperature, yearly precipitation and extreme precipitation.
The authors acknowledged that substantial uncertainties remain while projecting the cost impacts of climate change.
They said uncertainties are primarily "socio-economic" -- how long the impacts persist and how well society can adapt.
They added that the total cost of climate change is likely "considerably higher" as the study did not include non-economic impacts, droughts, sea-level rise, and climate tipping points.
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