Climate economics isn’t broken: debating the true damage figure does not negate the threat

December proved to be a challenging period for climate economics. The Network for Greening the Financial System (NGFS), a climate-focused forum for central bankers and financial supervisors, had only just updated their scenario estimates of the potential effects of climate change on the economy, when the scientific credibility of the paper by Profs Kotz, Levermann and Wenz (all of the Potsdam Institute for Climate Impact Research) on which these changes were based was thrown into question. The seriousness of the critiques was such that Nature, the journal that published the findings, required the paper to be retracted rather than corrected through a corrigendum.

The retraction had implications beyond academia, as the GDP loss estimates by Professor Kotz and his colleagues, presented as reflecting recent advances in climate economics, were more pessimistic than those previously used by the NGFS. This posed a risk to the credibility of both the authors and the NGFS.

We intend to put this retraction in its wider context, because it has been used to discredit not only this paper but climate economics more broadly. Amid heightened climate-related tensions across the Atlantic, the integrity of the field can only be safeguarded by holding firmly to a fact-based perspective. 

First, the retraction itself reflects Nature’s exceptionally high editorial standards. The authors, after taking some data objections into account, produced updated estimates of GDP losses that were very similar to their original ones (a change in projected 2050 global real GDP loss from 19.0% to 17.0%). According to the authors, the main conclusions of the revised analysis still hold[1]. Unlike most journals, which would have requested a correction, Nature required resubmission and re-refereeing on the grounds that the global results showed an unexpectedly large sensitivity to a single small economy – Uzbekistan – where an error had occurred, as initially identified by Bearpark et al. (2025)[2]. Additionally, Schötz (2025) [3] highlighted concerns regarding uncontrolled spatial correlations across regions within the same country, which may have led to wider-than-expected uncertainty. This contribution made an intuitive claim by suggesting that subnational observations are not fully independent, and so the effective sample size is smaller than assumed. Finally, Hopper (2026)[4] published a critique on the Bank Policy Institute’s website, contending that summing lagged effects across years while keeping coefficient magnitudes constant (rather than allowing them to decay over time) likely exaggerated projected damages, and that a model with fewer lags would be more appropriate.

Since this revision process will take time, the debate is ongoing, and the reputational erosion may endure. At the EDHEC Climate Institute (ECI), we have independently produced GDP- and sector-level projections of climate damages. Despite using different data sources (which therefore do not suffer from the ‘Uzbekistan problem’), our estimates coincide with Kotz’s in sign and order of magnitude and remain broadly compatible with the early yet significant losses identified by Profs Burke, Hsiang, and Miguel (2015). Accordingly, we argue that the climate damage narrative is globally unchanged, as is its risk for society. This is what should fundamentally matter to investors and the general public in search of climate answers.

Second, the debate over the exact magnitude of Kotz’s damage estimates must not obscure the major scientific contribution of this study. We refer here to its innovative, comprehensive, and methodologically rigorous approach, which (i) calculated economic damages across a larger number (or range) of sub-national regions (which no one had ever done before), (ii) incorporated a richer set of variables to better represent the physical risks underlying climate change, and (iii) considered both contemporaneous and more persistent climate impacts over time. Elements (i)–(iii) have unquestionably pushed the literature on macroeconomic climate damage forward.

Third, the larger lesson is that there certainly is uncertainty in our understanding of the true macroeconomic cost of climate change. Yes, honest mistakes happen in science, and even famous economists are not immune[5]. On the other hand, tipping points in the climate system, generally excluded from this literature, may operate in ways not captured by scenario uncertainty (or scenarios at all) and could substantially increase the magnitude of future damages. Overall, there is a high level of transparency that characterizes NGFS-related products and source materials. We may take it for granted, yet the prevalence of proprietary research in the climate-finance industry reminds us that we should not. Openness and academic rigour on the one hand, challenges and corrections on the other, exemplify how good science works, not how it fails.