Climate impacts outside Europe pose greatest risk to German economy

Climate impacts outside Europe pose greatest risk to German economy

By Will Bugler

European countries that avoid the most severe direct impacts of climate change themselves will not be spared economic damage from climate change, so suggests a new study. The report from the German Environment Agency (UBA), shows that the effects of climate change on countries outside of Europe, pose a much larger risk to Germany’s economy that climate impacts within Europe, because of international trade networks.

COVID-19 has demonstrated clearly the impacts that global systemic risk can have on individual countries’ economies. In a similar way, climate risks that affect one region will cause damage to economies around the world. Globalised trade networks mean that climate risks are therefore shared by all nations. The report’s findings are in line with similar studies from the United Kingdom and Switzerland.

“The effects of foreign trade alone are at least as significant as the economic consequences of climate change within national borders.” The study concludes. Germany and other EU nations, therefore stand to suffer indirectly from the impact of climate change outside the EU.

Countries and regions such as China, India, South and Southeast Asia, the Middle East and Africa are expected to see significant losses in welfare and GDP as a direct result of the impact of climate change on labour productivity, agricultural yields and sea levels.

“The purchasing power of the countries in these regions drops significantly compared to the reference trend without climate change, with considerable indirect negative consequences for Germany as a trading partner,” the study states.

The researchers note, however, that the transnational effects of global climate change cannot simply be cushioned by a general reduction in international trade relations. Such a move could not only lead to significant losses in prosperity in Germany, but also to a disruption in the worldwide production of goods and services and “networking that is central to the social and political stability of the world”, the researchers point out.

Instead, the study recommends that the resilience of the German economy “be improved through greater diversification or restructuring of global trade relations. This must be accompanied by targeted support for adaptation measures in the severely affected regions of the world, which are important for Germany in terms of supply and sales markets and are difficult to substitute”.

Download a copy of the report here [German].

Cover photo by  Markus Spiske on Unsplash.

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