This report presents the conclusions of the study titled "Macro-economic / Top-down Assessment of Climate Impacts on the EU Economy." Commissioned to assist the European Commission’s Directorate-General for Climate Action (DG CLIMA), the study explores how climate change-induced hazards may influence the EU's socio-economic landscape. Its central aim is to deliver both qualitative and quantitative perspectives on the broader macro-economic effects of significant climate hazards. It also investigates how these climate-related shocks ripple through different sectors of the economy. By compiling and analysing relevant data, the study provides a knowledge base to help the European Commission assess how such impacts could potentially challenge the EU’s ability to meet its climate mitigation objectives.

Methodological Approach: Literature Review and Macroeconomic Modelling

To achieve the study's objectives, a structured, multi-phase methodology was implemented, starting with an in-depth review of literature on the socio-economic costs of inaction, climate hazards, tipping points, and damage functions, alongside damage costs of past climate-related events in the EU and nearby regions. This evidence base guided the design of the modelling framework and selection of variables. The core analysis applied the NEMESIS macroeconomic model to assess the EU's future economic impacts under two scenarios: "No further action" and "Paris Agreement Compliant." These scenarios incorporated climate impact data and evaluated the effects of adaptation policies and investment costs.

Key Findings: Economic Losses and the Role of Adaptation Measures

The results of the modeling show that the impacts of climate change on the EU economy in the middle of the century are expected to be significant (-1.5% of EU GDP and up to -2.3%), even if deep decarbonisation, compliant with the Paris Agreement, is achieved (-0.9% and up to -1.5%). In case of no additional GHG mitigation effort globally, the upward trend on the economic impacts of climate change damages would continue, while it would stabilise in a Paris Agreement compliant scenario. These economic losses can be mitigated with appropriate adaptation measures in both scenarios.