The study of all the world's major cities shows that the total economic costs of climate change for cities this century could be 2.6 times higher when heat island effects are taken into account than when they are not.
For the worst-off city, losses could reach 10.9 per cent of gross domestic product (GDP) by the end of the century, compared with a global average of 5.6 per cent, researchers, including those from University of Sussex in the UK, said.
The urban heat island occurs when natural surfaces, such as vegetation and water, are replaced by heat-trapping concrete and asphalt, and is exacerbated by heat from cars, air conditioners and so on.
This effect is expected to add a further two degrees to global warming estimates for the most populated cities by 2050.
Higher temperatures damage the economy in a number of ways - more energy is used for cooling, air is more polluted, water quality decreases and workers are less productive, to name a few.
Researchers said their analysis is significant because so much emphasis is placed on tackling global climate change, while they show that local interventions are as, if not more, important.
"Any hard-won victories over climate change on a global scale could be wiped out by the effects of uncontrolled urban heat islands," said Professor Richard Tol from the University of Sussex.
"We show that city-level adaptation strategies to limit local warming have important economic net benefits for almost all cities around the world," said Tol.
Although cities cover only around one per cent of the Earth's surface, they produce about 80 per cent of Gross World Product, consume about 78 per cent of the world's energy and are home to over half of the world's population. Measures that could limit the high economic and health costs of rising urban temperatures are therefore a major priority for policy makers.
The research team carried out a cost-benefit analysis of different local policies for combating the urban heat island, such as cool pavements - designed to reflect more sunlight and absorb less heat - cool and green roofs, and expanding vegetation in cities.
The cheapest measure, according to this modelling, is a moderate-scale installation of cool pavements and roofs.
Changing 20 per cent of a city's roofs and half of its pavements to 'cool' forms could save up to 12 times what they cost to install and maintain, and reduce air temperatures by about 0.8 degrees, researchers said.
Doing this on a larger scale would produce even bigger benefits but the vastly increased costs mean that the cost-benefit ratio is smaller, they said.
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