Reported by Alvise Lennkh-Yunus
Long-term climate risks at the sovereign level are highly country-specific and depend on the scenario. Furthermore, forecasts point to a wide range of possible outcomes that reflect the uncertainty inherent in climate scenarios.
In a recent study, Scope Ratings has estimated the economic impact of climate risks over a 30-year time horizon for EU countries and selected G20 sovereign issuers, arising from chronic physical risk, acute physical risk and transition risk, based on the work of the Network for the Greening of the Financial System (NGFS).
The economic impact is measured as cumulative losses in percentage points of GDP, based on three NGFS climate transition scenarios: orderly, disorderly and ‘greenhouse world’. With this in mind, the main conclusions are: In the case of Spain, for example, the estimated economic costs – excluding acute physical risks – could range from a minimum of 3.8 per cent of GDP to a maximum of 6.8 per cent, depending on the scenario and model applied. The estimated range is somewhat wider, albeit at lower levels, for Germany and Italy, where the projected impacts range from 0 per cent to 5 per cent of GDP.
The uncertainty is even greater in the case of several non-EU countries. For example, Japan could benefit from climate change risks by up to 1 per cent of GDP or suffer losses of close to 6 per cent, whilst India stands out as potentially facing losses of between 6 per cent and 16 per cent of GDP.
