Global Economic Impacts of Physical Climate Risks

September 8, 2023

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Format: Chicago

Caterina Lepore, and Roshen Fernando. Global Economic Impacts of Physical Climate Risks, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Agricultural sector, Climate change, Economic sectors, Environment, Natural disasters, Production, Productivity

Keywords: Agricultural sector, Capital markets department, Climate change, Climate risk, Climate risk analysis, Europe, Global, Natural disasters, North America, Physical capital, Productivity, Productivity change, Western Europe

Publication Details

Pages:

125
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/183
Stock No:

WPIEA2023183
ISBN:

9798400254147
ISSN:

1018-5941

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