The Global Geography of Long-Term Projected Macroeconomic Damages from Chronic Physical Climate Risk: Country vs. Intra-Country Distribution

The Global Geography of Long-Term Projected Macroeconomic Damages from Chronic Physical Climate Risk: Country vs. Intra-Country Distribution

This study analyses the long-term macroeconomic consequences of chronic physical climate risk by examining how countries and subnational regions respond to plausibly exogenous fluctuations in temperature and precipitation. Using econometric estimates derived from historical data and combining them with high-resolution climate projections from the CMIP6 ensemble, the paper provides spatially disaggregated projections of climate-induced economic damages. By explicitly accounting for intra-country climatic and economic heterogeneity, the analysis shows that aggregated national models may substantially underestimate future losses in economic output attributable to climate change.

Author(s)

Nicolas Schneider

Objective
To quantify long-term climate change–driven macroeconomic damages to per capita GDP at both country and subnational levels, and to assess how spatial aggregation affects projected economic losses.

Data and coverage

Country-level data for 166 economies from the Penn World Tables (1970–2018).
Subnational economic output data for 1,661 administrative regions from the MCC-PIK DOSE database.
Climate exposures derived from high-frequency (3-hourly), 0.25° gridded temperature and precipitation data from NASA’s GLDAS.
Future climate projections based on an ensemble of 30 CMIP6 global climate models, with a focus on a subset of 15 models within “likely” physical ranges.

Methodology
The paper employs fixed-effects panel econometric models to estimate non-linear responses of per capita GDP growth to temperature and precipitation shocks. These empirically estimated response functions are combined with CMIP6 climate projections under moderate (SSP2-4.5) and vigorous (SSP5-8.5) warming scenarios to generate spatially explicit projections of climate-induced economic damages through the end of the century.

Key findings

Economic output exhibits a smooth, non-linear, and concave response to temperature, with productivity declining as average temperatures move beyond historical optima.
Accounting for subnational heterogeneity substantially increases estimated damages relative to country-level models.
Under a high-warming scenario, projected end-century per capita GDP losses attributable to temperature shifts alone can reach up to 70% in the most exposed regions, particularly in tropical and equatorial areas.
Aggregation at the national level masks significant within-country disparities and leads to systematically lower estimates of climate damages.

Contribution
The study provides a consistent framework for producing spatially disaggregated projections of climate-induced macroeconomic damages covering regions responsible for the majority of global economic production. It demonstrates that incorporating localized climatic exposure and intra-country economic heterogeneity fundamentally alters conclusions drawn from previous global GDP damage models.