Long-term Integrated Impact Assessment

Economic assessment under Climate Change up till 2100

What do the results tell us?

The results of the long term integrated impact assessment, comparing a "low emissions – low growth" with a "high emissions – high growth" pathway, show that there is a notable difference between the direct economic effect of climate change on an economic activity and the resulting economic impacts to a country or a region. Secondly, the results show that the picture changes quite radically, when these effects are put in a broader economic context. Nearly all sectors across regions face negative impacts, especially under the "high emissions – high growth" pathway. 

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What can we do with the results?

The assessment allows for a comprehensive assessment of adaptation strategies, which not only looks at the current socioeconomic state of affairs but also considers how economic agents will respond to the effects of climate change in a future socioeconomic context. Our projections have shown that the latter element may have larger impacts on the economic consequences than the mere changes in climate.

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How are the results obtained?

The long-term macroeconomic projections are derived from the global computable general equilibrium model GRACE, which integrates the impacts of climate change on specific economic activities. The model projects the consequences of climate change on main macroeconomic indicators, such as GDP, sector composites and prices in eight regions of Europe, in addition to a region that covers the rest of the world. Future economic impacts of climate change are projected with reference to given pathways for population, economic growth and emissions, while climate projections are based on the same emission pathways.

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What are the broader applications?

Besides informing about the macroeconomic indicators in a national accounts format, the projections also indicate changes in sector prices and prices on the primary factors of production, labour, capital and natural resources.

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Key Messages and Conclusions

Challenges to adaptation cannot be mitigated by high economic growth

The impacts of climate change under the "high emissions-high growth" scenario will be stronger and will occur much earlier than under the more moderate "low emissions-low growth" scenario. By mid-century, income per capita will already be one third lower than the level anticipated for the end of this century under the "low emissions-low growth" scenario. The economic impacts under the "high emission – high growth" pathway will also grow incrementally: from a 0.15 percent reduction in the growth rate in Europe between 2010 and 2050 to a reduction of 0.2 percent per year in the second half of the century. This means that there will be fewer resources available for adaptation, while at the same time the impacts of climate change and consequently also the need for adaptation will be considerably higher under a high-growth scenario. 

Impacts of climate change on GDP by region in the "low growth – low emission" alternative

Impacts of climate change on GDP by region in the "high growth – high emission" alternative

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In a broader economic context almost all sectors face negative impacts

The results of the assessments show a notable difference between the direct economic effect of climate change on an economic activity and the resulting economic impacts to a country or a region. This is illustrated in the four figures below.

When climate change effects are put in a broader economic context (see lower two figures), nearly all sectors across regions face negative impacts, and especially under the "high emissions – high growth" pathway (lower right side). Differences between sectors and regions are to some extent leveled out. 

Direct effects of climate change in 2090 in the "low growth – low emissions" alternative. European average (bars) and ranges over European regions (lines)

Direct effects of climate change in 2090 in the "high growth – high emissions" alternative. European average (bars) and ranges over European regions (lines).

Economic impacts of climate change by sector in 2090 in the "low growth – low emissions" alternative. European average (bars) and ranges over European regions (lines)

Economic impacts of climate change by sector in 2090 in the "high growth – high emissions" alternative. European average (bars) and ranges over European regions (lines)

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