Climate change triggers supply-chain losses that substantially exceed direct damages
Listed in
This article is not in any list yet, why not save it to one of your lists.Abstract
Climate change is already disrupting economies worldwide, yet most estimates of its cost focus narrowly on direct local damages such as heatwaves and floods, thereby underestimating the full scale of global losses, by neglecting indirect effects that ripple through global supply chains. Using a multi-region input-output framework and production flexibility data, we present the first comprehensive global assessment of the indirect costs of climate-induced economic disruption cascading across regions and sectors. Here we utilise detailed long-term production flexibility data to show conclusively that i) these indirect costs substantially exceed the costs of the immediate damages by up to 5 times, ii) production recipe flexibility critically determines the magnitude of total losses, and iii) that economic costs of climate change impacts are likely below 5% of world GDP for warming of up to 3°C, but can reach 15% of world GDP for warming exceeding 4°C. Our second key result demonstrates the utility of input–output models for climate risk assessments and policy responses that account for indirect, cross-border effects. Our study expands on prior work by revealing not only a more comprehensive scale of potential losses but also the value of building flexibility and resilience into the global economy.