Title page 1

Contents 5

Abstract/Résumé 4

1. Introduction 7

2. Estimation of local climate damages (Module I) 11

2.1. Flooding and the capital stock 12

2.2. Heat stress and productivity 12

2.3. Changes in agro-climatic conditions and agricultural productivity 13

2.4. Sea level rise and land loss 14

3. Climate projections and calibrating climate impacts (Module II) 15

3.1. Climate projections 15

3.1.1. Flood projections 15

3.1.2. Heat projections 17

3.1.3. Projections of agro-climatic conditions 18

3.1.4. Sea-level rise 19

3.2. Calibration of climate impacts 20

4. The climate and adaptation spatial general equilibrium model: OECD-CASGEM (Module III) 23

4.1. Overview 23

4.2. Model calibration 26

4.2.1. Regions and sectors 26

4.2.2. Data sources 27

4.2.3. Model parameters 27

5. Quantitative results 28

5.1. The macroeconomic impact of climate change 29

5.2. The role of economic linkages in transmitting climate shocks 32

5.3. The role of adjustment: how trade and labour mobility shape the distribution of global losses 35

6. Discussion and policy implications 38

References 41

Annex A. Additional tables and figures 45

Annex B. Further detail: Flood firm-level analysis 59

Regression specification 59

Results 60

Annex C. Further detail: impact of heat stress on firm productivity 62

Regression specification 62

Results 63

Annex D. Further detail: projections of future flood damages 65

Annex E. Model description, equilibrium, calibration, and counterfactuals 68

Model Description 68

Definition of equilibrium 72

Equilibrium conditions 72

Calibration of baseline model 74

Data sources 74

Counterfactual simulations 82

Annex F. Further results on quantitative analysis: Impact on population 85

Figure 1. Quantifying the Cost of Climate Risks: A Micro-based, Bottom-up Approach 11

Figure 2. Effect of climate change on flood frequency in 2080 relative to 1980 16

Figure 3. Projected change in annual number of hot days (2081-2100 vs 1981-2000) under a high-emission scenario (SSP5-8.5) 18

Figure 4. Projected change in crop yields in 2071-2100 relative to 2011-2040 under a high-emission scenario (SSP5-8.5) 19

Figure 5. Population affected by sea level rise in 2100 under a high-emission scenario (SSP5-8.5) 20

Figure 6. Damages from climate change by impact channel in 2100 under a high-emission scenario (SSP5-8.5) 22

Figure 7. The Climate and Adaptation Spatial General Equilibrium Model (OECD-CASGEM) 26

Figure 8. Economic impact under the current-policy scenario (SSP2-4.5) 30

Figure 9. Economic impact under a high-emission scenario (SSP5-8.5) 31

Figure 10. Model mechanisms play a key role in shaping the size of losses around the world 34

Figure 11. The ability to adjust to a changing climate has a large effect on the distribution of losses 36

Boxes 25

Box 1. CASGEM within the OECD modelling tools 25

Table E.1. Data sources used in the model calibration 76

Table E.2. Calibrated model parameters 77

Figure A.1. Effect of climate change on coastal flood frequency in 2080 relative to 1980 45

Figure A.2. Change in agro-climatic potential yields of major crops in 2071-2100 relative to 2011-2040 under RCP8.5 46

Figure A.3. Regions in calibrated model by OECD status 47

Figure A.4. Impact by channel in OECD+ countries under the current-policy scenario (SSP2-4.5) 48

Figure A.5. Impact by channel in OECD+ countries under a high-emission scenario (SSP5-8.5) 49

Figure A.6. Impact by channel in OECD countries under the current-policy scenario (SSP2-4.5) 50

Figure A.7. Impact by channel in OECD countries under a high-emission scenario (SSP5-8.5) 51

Figure A.8. Regional impact by channel under the current-policy scenario (SSP2-4.5) 52

Figure A.9. Regional impact by channel under a high-emission scenario (SSP5-8.5) 53

Figure A.10. Impact in OECD countries under the current-policy scenario (SSP2-4.5) 54

Figure A.11. Impact in OECD countries under a high-emission scenario (SSP5-8.5) 55

Figure A.12. Effect of ability to adjust to a changing climate on GDP per capita impacts across OECD+ countries in 2100 under... 56

Figure A.13. Average country-level GDP per capita in 2011-2020: model vs data 58

Figure B.1. Floods affect firms mainly through their impact on capital stocks 60

Figure C.1. Impact of an additional hot day on firm productivity 64

Figure D.1. Effect of climate change on coastal flood frequency in 2080 relative to 1980 66

Figure D.2. Population exposed to riverine flooding 67

Figure F.1. Change in population due to climate change under a current-policy scenario (SSP2-4.5) 86

Figure F.2. Change in population due to climate change under a high-emission scenario (SSP5-8.5) 87

Figure F.3. Regional population changes under a current-policy scenario (SSP2-4.5) 88

Figure F.4. Regional population changes under a high-emission scenario (SSP5-8.5) 89