The World Bank warned Friday that Kenya might lose up to 7.25% of its economic output by 2050 if does not take decisive steps to adapt to climate change and lessen its effects.
Like other so-called frontier economies, the East African nation has been suffering from the effects of global heating, including prolonged droughts, in recent years.
"By 2050, inaction against climate change could result in a decline in real gross domestic product (GDP) of 3.61-7.25%," the World Bank said in a new publication called Kenya Country Climate and Development Report.
"The impact of climate change on the economy could be partly buffered by a higher annual growth rate and structural transformation," it said.
If Kenya's economy grows 7.5% per year through to 2050, in line with the government's target, the damage of climate change to economic output would drop to 2.78-5.3%, the report said.
It called for increased investments in water resources management, farming, energy, transport and digital systems to help reduce the impact of climate change.
With about 90% of its electricity coming from renewable sources like hydro-generation and geothermal wells, Kenya is well positioned to provide solutions to other countries looking to lower their emissions, the report said.
"If Kenya maintains a low-carbon growth path, it could seize opportunities created by the global decarbonization trend and create green jobs," it said.
While achieving a carbon-free electricity energy system by 2030 will require investments of up to $2.7 billion, it will be cost-effective in the long run as the investments will be offset by lower fossil fuel costs, the report said.
It also urged the government to broaden the range of climate financing available by increasing the scope of projects to make them national and bankable.
"Finance directed toward climate in the development budget disproportionately targets the renewable energy sector," it said. "Agriculture, forestry and land use, transport, water management and other key sectors are significantly underfunded."