The implications of climate change on Germany’s foreign trade: A global analysis of heat-related labour productivity losses

We investigate climate change impacts transferred via foreign trade to Germany, a country which is heavily engaged in international trade. Specifically, we look at temperature changes and the associated labour productivity losses at a global scale until 2050. We assess the effects on Germany’s imports and exports by means of a global Computable General Equilibrium (CGE) model. To address uncertainty, we account for two Shared Socioeconomic Pathways (SSP2 and SSP3) and two Representative Concentration Pathways (RCP4.5 and RCP8.5) using projections from five global climate models. We find that average annual labour productivity for high intensity work declines by up to 31% (38% with the higher emission scenario) in South-East Asia and the Middle East by 2050 (relative to a 2050 baseline without climate change). As a consequence, Germany’s imports from regions outside Europe are lower by up to 2.4%, while imports from within Europe partly compensate this reduction. Also Germany’s exports to regions outside Europe are lower but total exports increase slightly due to higher exports to EU regions. Germany’s GDP and welfare, however, are negatively affected with a loss of up to -0.41% and -0.46%, respectively. The results highlight that overall positive trade effects for Germany constitute a comparative improvement rather than an absolute gain with climate change.