Economic Consequences of Climate Risk: Evidence from High-Risk Asian Economies
Keywords:
Economic Consequences, Climate Risk, Asian Economics, Economic GrowthAbstract
The present study investigates the economic consequences of climate risk by analyzing how exposure to high climate vulnerability influences macroeconomic performance in Asian economies. By incorporating climate change shocks into a neo-classical growth framework, this study develops a climate–economy growth model and employs the Pooled Mean Group–Autoregressive Distributed Lag (PMG–ARDL) estimation technique over the period 1971–2024 for high-risk Asian economies. The empirical analysis examines both aggregate and sectoral impacts of rising temperatures and climate variability on GDP growth, with special focus on manufacturing, logistics, and services sectors. The results reveal that high exposure to climate risk significantly reduces economic growth, with temperature-induced productivity losses observed to be larger in economies characterized by limited adaptation capacity and high dependence on climate-sensitive sectors. Specifically, a 1°C increase in population-weighted mean surface temperature leads to an estimated 5.2% decline in GDP growth with 2.6% deceleration in high-risk economies, exceeding regional averages by 1.4 percentage points. Further, sectoral analysis indicates that manufacturing, logistics, and services experience the highest reductions in output growth, amplifying regional disparities and income inequality. Projections based on IPCC’s Shared Socio-economic Pathways (SSPs) suggest that under the high-emission scenario (SSP8.5), potential GDP losses could reach up to 63% of current levels by 2100 if no substantial mitigation or adaptation measures are implemented. Conversely, limiting temperature rise to SSP4.5 and SSP2.6 could optimize these losses to below 1% by the end of the century. The study concludes that urgent regional cooperation and targeted adaptive policies are required to strengthen economic resilience, reduce vulnerability, and sustain long-term growth trajectories in high-risk Asian economies.
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