Global Economic Impacts of Climate Shocks, Climate Policy, and Changes in Climate Risk Assessment

Global Economic Impacts of Climate Shocks, Climate Policy, and Changes in Climate Risk Assessment. Brookings Institution. Roshen Fernando, Weifeng Liu, and Warwick J. McKibbin. March 31, 2021

This study assesses the global macroeconomic consequences of changes in climate risk. We explore three broad areas: (1) the macroeconomic impacts of physical climate risk due to chronic climate change associated with global temperature increases and climate-related extreme shocks; (2) the macroeconomic effects of climate policies designed to transition to net zero emissions by 2050 (transition risk); and (3) the potential macroeconomic consequences of changes in risk premia in financial markets associated with increasing concern over climate events.

To assess the macroeconomic consequences of climate change, we consider four widely used climate scenarios (Representative Concentration Pathways, or RCP), and identify the physical damage functions due to chronic climate risks from the literature. The chronic climate risks considered in this study include sea-level rise, crop yield changes, heat-induced impacts on labor, and increased incidence of diseases. [Note: contains copyrighted material].

[PDF format, 80 pages].

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