The climate and adaptation spatial general equilibrium model (OECD-CASGEM): The macroeconomic cost of climate change

Diogo Baptista, Hélia Costa and Filiz Unsal

No 1875, OECD Economics Department Working Papers from OECD Publishing

Abstract: This paper develops a micro-based, bottom-up approach to quantify the macroeconomic costs of climate change. It combines empirically estimated local climate damages with a global spatial general equilibrium model: the Climate and Adaptation Spatial General Equilibrium Model (OECD-CASGEM). The model links location-specific climate hazards to economy-wide outcomes through trade, migration, production networks, and factor adjustments, capturing the role of spatial and economic adjustments as adaptation shaping aggregate and regional losses. Estimated global GDP per capita losses amount to 3% by 2050 and 6.3% by 2100 under a current-policy scenario (SSP2-4.5) and to 6% and 18%, respectively, under a high-emission scenario (SSP5-8.5), with large associated uncertainty. Losses are highly uneven across regions and are larger in lower-latitude countries and those historically more exposed to climate hazards. Counterfactual simulations show that trade linkages, migration and production networks can dampen or amplify aggregate losses depending on countries’ exposure, economic structure and position in global networks. Spatial mechanisms, in particular, reduce cross-regional dispersion in impacts, effectively operating as a form of implicit loss-sharing across locations.

Keywords: Adaptation; Climate change; Climate damages; Production networks; Spatial general equilibrium; Trade and migration (search for similar items in EconPapers)
JEL-codes: F12 Q51 Q54 R13 (search for similar items in EconPapers)
Date: 2026-09-04
New Economics Papers: this item is included in nep-uep
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1875-en

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