Climate change: Identifying the impacts on public finances

In an explorative study commissioned by the Federal Ministry of Finance, the Ecologic Institute is currently analysing the long-term impacts of climate change on Germany’s financial budget. On 26 November 2008, Ingo Bräuer presented first results to the Ministry’s Working Group on Public Finance and discussed methodological questions with the experts in the audience.

The study aims at exploring how climate change will impact public finances under different economic and climate scenarios. As a first analytical step, the team establishes causal chains detailing how climate change impacts could influence the public budget. This qualitative analysis includes direct and indirect growth impacts at the national level as well as changes in the international trade patterns. Consequently, rough estimates of the quantitative effects (positive and negative) will be produced. The Ecologic Institute is leading the project in cooperation with Infras.

Since the research team is entering uncharted waters in terms of methodology, the presentation at the working group meeting provided a highly appreciated opportunity to discuss the methodological approach with public finance experts. The debate centred on the questions of how to deal with uncertainty, the long time horizon, and on whether or not adaptation measures should be taken into account.