Global | In the long run, climate change is not neutral for GDP and could be positive

Summary

Climate change is not neutral for potential GDP: unmanaged warming acts as a negative supply shock, while early, credible mitigation and adaptation can offset damages and may generate long-run gains, albeit with high uncertainty and strong scenario dependence.

Key points

• Key points:
• Climate change affects potential GDP through all supply-side channels—capital, labour, and total factor productivity—via chronic impacts and extreme events.
• Under policy inaction, climate change operates as a persistent negative supply shock, leading to sizeable and widening long-run losses in potential output.
• Early, credible, and well-designed mitigation and adaptation strategies can offset climate damages by boosting green investment, innovation, and capital renewal.
• Long-run GDP impacts are highly uncertain and scenario-dependent, with strong regional asymmetries, but likely larger losses under unmanaged climate change.

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