Macroeconomic amplification of climate change damages: modeling the role of socioeconomic drivers
Abstract
Abstract The long-run economic impacts of climate change depend not only on direct productivity losses but also on macroeconomic feedbacks. Here we introduce a representation of the macroeconomic impact of climate change within a process-based integrated assessment model, IMACLIM-R World. We analyze the macroeconomic conditions that may amplify damages over time through reduced capital accumulation, assessing six key drivers: saving rates, population, labor productivity, openness of international financial flows, fossil fuel availability, and energy intensity. Using the Shared Socioeconomic Pathways (SSP) framework, we contrast these drivers across three no-climate-policy scenarios (SSP1, SSP2, SSP3). We distinguish direct impacts, prescribed by a damage function, from total impacts that incorporate amplification via reduced investment and slower capital accumulation. Our results show that in 2100, indirect impacts could account for 25–50 % of global total losses and up to 80 % in some regions. Sensitivity analysis reveals that economies with low savings, rapid population or labor productivity growth, or constrained financial flows face stronger investment shortages and higher total impacts. Macroeconomic amplification can even reverse the ranking of regional damages, highlighting that total climate costs, and their distribution across regions, cannot be inferred from damage functions alone. These findings demonstrate the importance of integrating capital accumulation…
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