Global Economic Impacts of Physical Climate Risks

Roshen Fernando and Caterina Lepore

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

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 risks (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 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 change; Climate risks; Extreme events; Macroeconomic modelling (search for similar items in EconPapers)
JEL-codes: C51 C53 C54 C55 C68 F41 Q51 Q54 (search for similar items in EconPapers)
Pages: 120 pages
Date: 2023-10
New Economics Papers: this item is included in nep-env and nep-int
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Citations: View citations in EconPapers (2)

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Working Paper: Global Economic Impacts of Physical Climate Risks (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-50

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