Global Economic Impacts of Physical Climate Risks

Caterina Lepore and Roshen Fernando

No 2023/183, IMF Working Papers from International Monetary Fund

Abstract: This paper evaluates the global economic consequences of physical climate risks under two Shared Socioeconomic Pathways (SSP 1-2.6 and SSP 2-4.5) using firm-level evidence. Firstly, we estimate the historical sectoral productivity changes from chronic climate risks (gradual changes in temperature and precipitation) and extreme climate conditions (representative of heatwaves, coldwaves, droughts, and floods). Secondly, we produce forward-looking sectoral productivity changes for a global multisectoral sample of firms. For floods, these estimates account for the persistent productivity changes from the damage to firms’ physical capital. Thirdly, we assess the macroeconomic impact of these shocks within the global, multisectoral, intertemporal general equilibrium model: G-Cubed. The results indicate that, in the absence of additional adaptation relative to that already achieved by 2020, all the economies would experience substantial losses under the two climate scenarios and the losses would increase with global warming. The results can be useful for policymakers and practitioners interested in conducting climate risk analysis.

Keywords: climate risk analysis; capital markets department; climate risk; physical capital; productivity change; Climate change; Productivity; Agricultural sector; Natural disasters; Global; North America; Western Europe; Europe (search for similar items in EconPapers)
Pages: 125
Date: 2023-09-08
New Economics Papers: this item is included in nep-agr, nep-env and nep-ger
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Working Paper: Global Economic Impacts of Physical Climate Risks (2023)
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