Economy-wide effects of climate interventions

🔍 New research reveals a sharper picture of the climate–economy connection: 📉 Climate change will likely hurt economic growth more severely than we thought. 📈 Meanwhile, the economic case for investing in climate action is stronger than ever. 𝐈𝐧 𝐬𝐡𝐨𝐫𝐭: 𝐜𝐥𝐢𝐦𝐚𝐭𝐞 𝐦𝐢𝐭𝐢𝐠𝐚𝐭𝐢𝐨𝐧 𝐢𝐬𝐧’𝐭 𝐣𝐮𝐬𝐭 𝐚𝐧 𝐞𝐧𝐯𝐢𝐫𝐨𝐧𝐦𝐞𝐧𝐭𝐚𝐥 𝐢𝐦𝐩𝐞𝐫𝐚𝐭𝐢𝐯𝐞—𝐢𝐭’𝐬 𝐚 𝐬𝐦𝐚𝐫𝐭 𝐞𝐜𝐨𝐧𝐨𝐦𝐢𝐜 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲. It delivers near-term growth while significantly reducing long-term losses. 𝐓𝐡𝐞 𝐞𝐯𝐢𝐝𝐞𝐧𝐜𝐞 Key takeaways from this paper ( 👉 https://lnkd.in/eZfKSq_x): 🟣 Most economic models assume climate change only affects a country's economy through local weather—but what if global weather disruptions matter more than we think? 🟣New research adds global weather variables to three major climate-economy models and finds: 🟣 𝐏𝐫𝐨𝐣𝐞𝐜𝐭𝐞𝐝 𝐠𝐥𝐨𝐛𝐚𝐥 𝐆𝐃𝐏 𝐥𝐨𝐬𝐬 𝐛𝐲 𝟐𝟏𝟎𝟎 𝐮𝐧𝐝𝐞𝐫 𝐡𝐢𝐠𝐡 𝐞𝐦𝐢𝐬𝐬𝐢𝐨𝐧𝐬 (𝐒𝐒𝐏𝟓-𝟖.𝟓) 𝐣𝐮𝐦𝐩𝐬 𝐟𝐫𝐨𝐦 ~𝟏𝟏% 𝐭𝐨 ~𝟒𝟎% 💥 Why? Because we're more interconnected than ever. Climate extremes in one country now: ➿ Ripple through global supply chains 🟪 Impact trade, food security, inflation, and more 📊 When these insights are plugged into the DICE 2023 integrated assessment model (see figure below 👇 ): The “optimal” level of warming for policy drops from 2.7°C ➡️ 1.7°C— aligned with the Paris Agreement, and Recommended carbon pricing and emissions cuts become far more ambitious In addition, the OECD - OCDE published a new paper ( 👉 https://lnkd.in/e6qJ6tuM) where they show that stronger climate targets (NDCs) could boost global GDP by 0.2% by 2040: ⚡ Low-carbon investments cut emissions intensity & drive productivity 💰 Policy clarity attracts investment—inaction could cost 0.75% of GDP by 2030 🌡️ Act now to avoid climate shocks: up to 13% GDP gain by 2100 if we enhance NDCs Climate action isn’t a cost—it’s a wise investment in future prosperity 🌱

New report shows climate action could boost, not weaken, economic growth 🌎 A new joint report by the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme (UNDP) concludes that taking strong action to address the climate crisis will lead to increased economic growth, challenging the common argument that climate policies hinder financial performance. The report finds that setting ambitious emissions reduction targets and implementing the necessary policies would result in a net gain of 0.23% in global GDP by 2040. This gain becomes even more significant when factoring in the avoided economic losses caused by unchecked climate change. The long-term economic benefits of climate action are particularly notable. By 2050, the most advanced economies could see a 60% increase in GDP per capita compared to 2025, while lower-income countries could experience a 124% rise. In the shorter term, investing in emissions reductions would lift an estimated 175 million people out of poverty by 2030, showing that climate action also has a significant social impact. In contrast, failing to act could result in the loss of up to one-third of global GDP over the course of the century. UNDP Executive Secretary Achim Steiner emphasized that investing in the transition to a low-carbon economy does not lead to regression but rather to modest and accelerating GDP growth. UN Climate Chief Simon Stiell also warned of the economic consequences of inaction, particularly for Europe. He projected that extreme weather and climate-related impacts could shrink the European economy by 2.3% annually by 2050, with cumulative effects comparable to a permanent state of recession. Stiell underscored that the climate crisis should be viewed as a national security issue, as increasing climate-related disasters threaten food security, displace populations, and destabilize regions. He noted that unlike the 2008 financial crisis, which had a finite duration, climate-induced economic contraction could persist indefinitely, eroding economies year after year. The risk of widespread unlivable regions and forced migration further adds to the urgency of coordinated global climate action. #sustainability #sustainable #business #esg #climatechange

How much climate change can the global economy “afford”? A recent study suggests we’ve been underestimating the economic risks of a warming planet. Traditional models often assess damage within national borders, looking at how each country is affected by events like droughts or storms on its own. But the world doesn’t work in silos. Economies are deeply interconnected, and disruptions in one region can ripple across the globe. This research takes a broader view, factoring in trade, supply chains, and other cross-border links. The results show that when these connections are included, projected global GDP losses from severe warming increase from 11% to 40%. And the economically “optimal” limit for warming drops from 2.7℃ to just 1.7℃. Climate change isn’t just a local or environmental issue—it’s a global economic challenge. Planning for the future means looking beyond borders and recognizing the full scale of interconnected risks. Read the research: https://lnkd.in/gEGD3ijT

🔥 Climate risks are no longer abstract—they’re disrupting businesses, communities, and economies right now. The World Economic Forum’s 2024 report, "The Cost of Inaction: A CEO Guide to Navigating Climate Risk", delivers a sobering message: ignoring climate risks isn’t just irresponsible—it’s economically devastating. 🌡️ Key insights from the report: 💥 Climate-related disasters have caused $3.6 trillion in damages since 2000, exposing critical vulnerabilities in supply chains and infrastructure. 📉 Physical risks could put 5-25% of EBITDA at risk for some sectors by 2050 under a 3°C warming trajectory. 💸 Transition risks, like carbon pricing and changing regulations, could impact 50% of EBITDA in energy-intensive industries by 2030. 🌱 Every $1 invested in climate adaptation yields $2-$19 in avoided costs, while green markets are projected to grow from $5 trillion in 2024 to $14 trillion by 2030. 💡 My reflections: 🔄 Resilience isn’t enough anymore. Too often, we focus on simply "weathering the storm" of climate risk. But true leadership is about rebuilding something better—rethinking markets, redesigning business models, and creating solutions that lead entire industries forward. 🌍 Supply chain fragility is the Achilles’ heel of the global economy. A single extreme weather event can cascade across operations, grinding everything to a halt. Climate-resilient supply chains can’t just be about survival—they must be radically adaptive, decentralized, and built to thrive under disruption. 📊 Climate risk is fundamentally redefining the concept of value. Businesses stuck chasing quarterly earnings are missing the bigger picture. In a world of rising costs and irreversible climate impacts, long-term value will belong to those who embed sustainability, resilience, and equity into their strategies. The time for cautious, incremental steps has passed. How are we using this moment to transform the way we work, innovate, and lead? #ClimateAction #Sustainability #Resilience #Leadership #Innovation

Günther Thallinger, board member at Allianz SE, has voiced his fear about unchecked #climatechange posing a systemic threat to capitalism, as the financial sector could collapse under the weight of #extremeweather impacts. 👉 Insurers are increasingly unable to offer coverage in regions hit hard by #climate impacts, such as #wildfire-prone areas. This withdrawal of insurance disrupts related financial services, including mortgages, investments, and infrastructure development. 👉 Without insurance coverage, the broader financial industry faces a "climate-induced credit crunch," significantly damaging economies by rapidly reducing asset values in vulnerable regions. Without higher ambitions on #climateaction, global temperatures are on track for a rise between 2.2°C and 3.4°C above pre-industrial levels, leading to catastrophic scenarios. At 3°C, the climate damages become impossible to insure, financially bail out, or adapt to, rendering existing economic systems ineffective. #Adaptation alone will not suffice, especially once #climateimpacts surpass human tolerances, leading to cities and infrastructure becoming permanently uninhabitable.We need to move quickly from #fossilfuels to #renewableenergy, technological solutions already exist, and only speed and scale are lacking. Capitalism itself must integrate #climate #sustainability as a core objective, aligning financial goals with #climateaction to remain viable. As already mentioned several times, the cost of climate inaction surpasses that of transitioning to sustainability, with potential economic benefits of effective climate action, such as efficiency and quality-of-life improvements. World Meteorological Organization

“Billions of people will lose their livelihoods and economic output reduced by up to 34% if the Earth is allowed to warm by 3 degrees Celsius this century, but investing less than 2% of GDP now could eliminate most of those losses.. What stands out is that productivity loss—not merely capital destruction—is the primary driver of economic damage… It is also clear that climate change will reduce income in all countries and across all sectors, affecting industries ranging from transport to manufacturing and retail, not only agriculture and other sectors commonly associated with nature… You can’t have an economy without a society, and a society needs somewhere to live. Nature is our foundation, providing food, water and air, as well as the raw materials and energy that power our economy. Threats to the stability of this foundation are risks to future human prosperity which we must take action to avoid.” https://lnkd.in/e2vf9aYs

How do we estimate climate change macroeconomic risks in The World Bank's Country Climate and Development Reports? We just published a methodological paper that present a methodology used in many of them, with our partners at Industrial Economics (IEc). The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability - with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. I think there are strong complementarity between empirical approaches (which measure historical aggregated impacts and are key for calibration and validation) and process-based modeling (which can consider possible thresholds in the future and run policy counterfactuals). The paper is here: https://lnkd.in/gpAURDV5. Comments welcome! Kodzovi ABALO, Ph.D, Brent Boehlert, Thanh Bui (Tania), Andrew Burns, Unnada Chewpreecha, Charl Jooste, Florent McIsaac, Kim Smet, Kenneth Strzepek, and Diego Castillo and Heather Ruberl.

The cost of climate inaction is staggering. Recent The American Prospect article based in part on a Bloomberg Intelligence report details how climate-fueled disasters cost the U.S. $955 billion in the last year— so nearly 3% of GDP, largely from destroyed infrastructure and skyrocketing insurance premiums.  🌪️ Beyond the economic costs, what is also worrying is how leading projections have significantly underestimated this damage. For instance, William Nordhaus’s DICE model predicts a hit of just 0.5 percent of GDP from 1.47 degrees Celsius of warming, which was the global average in 2024.  Author Ryan Cooper concludes, “If we’re off by a factor of six in the world’s second-largest economy, then something is seriously amiss.” 📉 Yet US politicians continue to abandon climate policy, despite the fact that investments in clean energy are now cheaper and more productive than maintaining fossil-fueled infrastructure.  In fact, reversing clean energy policies—as proposed by political leaders—will increase household energy bills by up to 17% and kill 1.7 million jobs by 2030. Yet companies and politicians continue to push the fossil fuel agenda under the guise of economic prudence. https://lnkd.in/eFjG7p5x

📗 𝐓𝐡𝐞 𝐍𝐆𝐅𝐒 𝐒𝐡𝐨𝐫𝐭-𝐭𝐞𝐫𝐦 𝐒𝐜𝐞𝐧𝐚𝐫𝐢𝐨𝐬 𝐚𝐫𝐞 𝐡𝐞𝐫𝐞! The group of over 100 central banks and supervisors just published a first-of-its-kind, publicly available tool to analyse the near-term impacts of climate policies and climate change on financial stability and economic resilience. 🖍 𝗛𝗲𝗿𝗲'𝘀 𝘄𝗵𝗮𝘁 𝘆𝗼𝘂 𝘀𝗵𝗼𝘂𝗹𝗱 𝗸𝗻𝗼𝘄: 𝐓𝐡𝐞 #𝐍𝐆𝐅𝐒 𝐬𝐡𝐨𝐫𝐭-𝐭𝐞𝐫𝐦 𝐬𝐜𝐞𝐧𝐚𝐫𝐢𝐨𝐬 𝐚𝐫𝐞 𝐡𝐢𝐠𝐡𝐥𝐲 𝐫𝐞𝐥𝐞𝐯𝐚𝐧𝐭 𝐟𝐨𝐫 𝐜𝐥𝐢𝐦𝐚𝐭𝐞 𝐫𝐢𝐬𝐤 𝐚𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐚𝐧𝐝 𝐩𝐨𝐥𝐢𝐜𝐲𝐦𝐚𝐤𝐢𝐧𝐠. The four different scenarios show that: ➡️ regional extreme weather events generate temporary but material GDP losses, with effect on the global economy, and could increase the cost of transition; ➡️ delaying transition efforts increase the economic costs of transitioning and could cause additional financial stress. 𝗟𝗲𝘁'𝘀 𝗹𝗼𝗼𝗸 𝗮𝘁 𝘁𝗵𝗲𝘀𝗲 4 𝘀𝗰𝗲𝗻𝗮𝗿𝗶𝗼𝘀: 1. 𝗛𝗶𝗴𝗵𝘄𝗮𝘆 𝘁𝗼 𝗣𝗮𝗿𝗶𝘀: A technology-driven and orderly transition unfolds gradually. (Transition risk in a relatively orderly transition). 2. 𝗦𝘂𝗱𝗱𝗲𝗻 𝗪𝗮𝗸𝗲-𝗨𝗽 𝗖𝗮𝗹𝗹: A world of widespread climate unawareness is challenged by a sudden change in policy preferences. (Transition risk in a more disorderly transition) 3. 𝗗𝗶𝘃𝗲𝗿𝗴𝗶𝗻𝗴 𝗥𝗲𝗮𝗹𝗶𝘁𝗶𝗲s: Advanced economies pursue a net-zero transition in line with Highway to Paris. The rest of the world is hit by a sequence of extreme weather events. (Partial transition with mounting physical risks). 4. 𝗗𝗶𝘀𝗮𝘀𝘁𝗲𝗿𝘀 𝗮𝗻𝗱 𝗣𝗼𝗹𝗶𝗰𝘆 𝗦𝘁𝗮𝗴𝗻𝗮𝘁𝗶𝗼𝗻: A sequence of region-specic extreme weather events result in capital destruction, reduced productivity and production, and cascading economic impacts. (Stalled transition and severe physical risks) 𝗛𝗼𝘄 𝗺𝗶𝗴𝗵𝘁 𝘁𝗵𝗲𝘆 𝗯𝗲 𝘂𝘀𝗲𝗱? These scenarios are 𝐩𝐚𝐫𝐭𝐢𝐜𝐮𝐥𝐚𝐫𝐥𝐲 𝐰𝐞𝐥𝐥-𝐬𝐮𝐢𝐭𝐞𝐝 𝐟𝐨𝐫 𝐜𝐥𝐢𝐦𝐚𝐭𝐞 𝐬𝐭𝐫𝐞𝐬𝐬-𝐭𝐞𝐬𝐭𝐢𝐧𝐠 𝐞𝐱𝐞𝐫𝐜𝐢𝐬𝐞𝐬 and for analysing financial risks that may materialise within a business-planning, policy-relevant timeframe. They also provide users with granular outputs across a wide range of financial variables, sectors and countries. 𝐓𝐡𝐞 𝐬𝐡𝐨𝐫𝐭-𝐭𝐞𝐫𝐦 𝐬𝐜𝐞𝐧𝐚𝐫𝐢𝐨𝐬 𝐚𝐫𝐞 𝐚 𝐦𝐚𝐣𝐨𝐫 𝗮𝗱𝘃𝗮𝗻𝗰𝗲 𝐢𝐧 𝗳𝗶𝗻𝗮𝗻𝗰𝗲'𝘀 𝘁𝗼𝗼𝗹𝗸𝗶𝘁 𝗳𝗼𝗿 𝐮𝐧𝐝𝐞𝐫𝐬𝐭𝐚𝐧𝐝𝗶𝗻𝗴 𝐜𝐥𝐢𝐦𝐚𝐭𝐞-𝐫𝐞𝐥𝐚𝐭𝐞𝐝 𝐫𝐢𝐬𝐤𝐬. While climate change is a long-term challenge, sudden events and policy shifts can already have a significant impact within a policy-relevant timeframe. The next five years will be important in mitigating climate change, and the NGFS short-term scenarios can help you navigate through these uncertain times. 💡 Stay tuned as we will have lots more analysis on the new scenarios in the weeks ahead! Access the full dataset here: https://lnkd.in/ePrs6hZV #climate #climaterisk #financialrisk #risk #finance #climatescenarios #climatedata

"A third of global GDP could be lost this century, if the #climate crisis were allowed to run unchecked." An upcoming OECD - OCDE | United Nations Development Programme (UNDP) report on the case for enhanced NDCs (Nationally Determined Contributions) reiterates the #economic realities of investing in #ClimateAction and the cost of inaction. At a time where climate #leadership is arguably more about staying the course and reaffirming commitment, the overview, presented at the at the 2025 Petersberg Climate Dialogue, reminds us of what we know to be true, not the myths that are currently being popularised. Some highlights from the key messages shared in Berlin over the past couple of days: ➡️ "Clean energy markets have rapidly expanded, 𝙛𝙪𝙚𝙡𝙡𝙚𝙙 𝙛𝙞𝙧𝙨𝙩 𝙗𝙮 𝙥𝙤𝙡𝙞𝙘𝙮 𝙖𝙣𝙙 𝙩𝙝𝙚𝙣 𝙢𝙖𝙧𝙠𝙚𝙩 𝙙𝙚𝙢𝙖𝙣𝙙... 𝙋𝙤𝙡𝙞𝙘𝙮 𝙪𝙣𝙘𝙚𝙧𝙩𝙖𝙞𝙣𝙩𝙮 𝙬𝙚𝙖𝙠𝙚𝙣𝙨 𝙞𝙣𝙫𝙚𝙨𝙩𝙢𝙚𝙣𝙩 𝙖𝙣𝙙 𝙨𝙡𝙤𝙬𝙨 𝙜𝙧𝙤𝙬𝙩𝙝." Setting aside the of shortcomings of leaving 'the market' to drive #ClimateAction, it's important to recognise that a market-based approach still requires #policy intervention is clear and critical. The reality is that the world we currently live in, the norms we have become used to, have all been driven by historic #policy decisions, #investments and #subsidies. The only way we will start to rebalance 'the market' is by addressing, reversing and repositioning those policy settings. ➡️ "A low-carbon economy 𝙞𝙨 𝙖 𝙢𝙤𝙧𝙚 𝙚𝙛𝙛𝙞𝙘𝙞𝙚𝙣𝙩 𝙚𝙘𝙤𝙣𝙤𝙢𝙮." At a time where all organisations are facing pressure to reduce costs and streamline in order to survive, the opportunities of a low-carbon economy, of designing out waste and finding the most efficient use of resources and energy, are broad and wide-ranging. ➡️ "Climate action delivers far-reaching 𝙗𝙚𝙣𝙚𝙛𝙞𝙩𝙨 𝙗𝙚𝙮𝙤𝙣𝙙 𝙂𝘿𝙋 𝙜𝙧𝙤𝙬𝙩𝙝... Actual benefits could be even greater, as uncertain 𝙘𝙪𝙧𝙧𝙚𝙣𝙩 𝙚𝙨𝙩𝙞𝙢𝙖𝙩𝙚𝙨 𝙙𝙤 𝙣𝙤𝙩 𝙛𝙪𝙡𝙡𝙮 𝙖𝙘𝙘𝙤𝙪𝙣𝙩 𝙛𝙤𝙧 𝙩𝙝𝙚 𝙚𝙘𝙤𝙣𝙤𝙢𝙞𝙘 𝙖𝙣𝙙 𝙨𝙤𝙘𝙞𝙖𝙡 𝙘𝙤𝙣𝙨𝙚𝙦𝙪𝙚𝙣𝙘𝙚𝙨 𝙤𝙛 𝙩𝙝𝙚 𝙞𝙣𝙘𝙧𝙚𝙖𝙨𝙚𝙙 𝙡𝙞𝙠𝙚𝙡𝙞𝙝𝙤𝙤𝙙 𝙤𝙛 𝙘𝙧𝙤𝙨𝙨𝙞𝙣𝙜 𝙩𝙞𝙥𝙥𝙞𝙣𝙜 𝙥𝙤𝙞𝙣𝙩𝙨, such as melting ice sheets or reversing circulation patterns in the ocean." Climate action isn't just a carbon play, or an environmental play. Climate action delivers broad benefits, to #health, to energy #security and access, to #poverty reduction.