The real economic dimensions of climate change

Content Partner: Lincoln University. The impacts of COVID-19 and efforts to stimulate recovery from the pandemic have highlighted the need for information about how disasters affect the real economy: temporal and spatial dynamics, cascading risks of disruption to employment, debt, trade, investments, bond markets, and real estate markets, among others. This commentary explores what information on the economic dimensions of climate change is needed to inform decisions about adapting to and effectively averting, minimizing, and addressing climate risks. We review the economic information presented in special reports from the IPCC AR6 cycle (SR1.5, SROCC, and SRCCL). We find that the information presented in these reports expands beyond costs of mitigation options, and potential negative GDP effects of climate impacts to include real economic dimensions in food production and land use (forestry and agriculture), coastal areas and fisheries, among others. This reflects an emerging literature which addresses a wider spectrum of economic and financial aspects relevant to climate change and national and regional priorities. Five emerging areas of work related to climate impacts on the real economy and on financial services provide essential additional information for decisions about efforts at all levels to achieve the objectives of the Paris Agreement and the overall objective of the UNFCCC Convention. Insights from economic analysis of the coronavirus pandemic—a sustained, complex disaster with global consequences across the real economy and financial services—can help highlight useful areas of research and discussion for policy makers considering climate impacts, vulnerabilities, and risks.