Macroeconomic Impacts of Climate Change, Climate Adaptation, and Climate Mitigation in Germany

This study examines the effects of climate mitigation, climate change as quantifiable effects of additional extreme weather events, and adaptation investments on economic growth in Germany. First, on the basis of a comprehensive literature review and further considerations, important impact channels are discussed. Second, the macroeconometric national model PANTA RHEI is used to quantify the effects. To this end, scenarios are refined with and without additional climate change, and with and without additional climate protection to achieve national reduction targets until 2045, and defined for the first time with and without adaptation to climate change. This is also the first combination of all three climate dimensions within the model. The results show that, in the model, the quantifiable effects of extreme weather events have a negative impact on GDP that can be reduced by adaptation. By contrast, climate mitigation has a positive effect. As only monetary effects are accounted for, negative effects of climate change and positive impacts of climate policy are underestimated in broader terms. The model results help to understand the interaction between mitigation and adaptation: without mitigation, the impact of the climate crisis will increase significantly. Adaptation measures may then have less impact or even become ineffective.