Climate Change Reflected in Macroeconomic Data, Says ESCAP Report

New research by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) reveals how climate change is already impacting economies in insidious but pervasive ways. The Economic and Social Survey of Asia and the Pacific 2025 calls for moving beyond gross domestic product (GDP) to fully value the economic effects of climate change.

Though GDP still leads as the most common economic performance metric, it is not comprehensive, particularly in reflecting the effects of climate and environmental conditions. Macroeconomic and microeconomic determinants like productivity, employment levels, capital investment, and technology adoption better reflect the manner in which climate change is destabilizing economies at various levels.

The report also goes on to state that the impacts of climate change are likely to remain unnoticed as they are accomplished through indirect or subtle mechanisms. To illustrate, temperature fluctuations affect productivity. It has been established through studies that economic productivity improves with temperature until a certain level, and that the "optimal" mean annual temperature has been estimated at 13°C. After this, productivity suffers—not just because of physical discomfort but also because of disruption to industries such as agriculture, which has its yields and seasons influenced by increased heat.

Farm producers confronted with such transformations can need new inputs, abilities, or types of crops but cannot afford altering. This leads to lower output and revenues. Health effects associated with increased heat, such as increased transmission of vector-borne disease such as dengue fever, can cause increased worker absenteeism and additional economic losses. School children who miss school or are hindered in learning during heat also contribute to long-term human capital losses.

The extreme weather conditions brought on by global warming result in loss of infrastructure and economic loss but also result in daily inefficiencies. Ongoing roadblocks, machinery failure during rainy days, and delayed logistics all contribute to reduced manufacturing and transport productivity. These low-hanging fruits of climate, when aggregated across a population, amount to massive national-level losses.

The knock-on consequences run deep. Shifting productivity lowers wages and household incomes, causing savings rates to decline. This limits domestic capital for business investment and increases the cost of credit. Eventually, this trend can influence house markets and national economic growth. These knock-on consequences illustrate the way that climate change seeps into the very heart of economic life, even if not immediately visible.

In spite of this, the precise size and character of these effects are inadequately quantified, especially at the local level. The Intergovernmental Panel on Climate Change (IPCC) has outlined that economic harm resulting from climate change grows with increasing temperatures, but because the methodologies and information used vary so greatly, it is challenging to pinpoint specific global estimates. However, the pattern is apparent: more warming begets more economic damage.

ESCAP's 2025 survey makes the case for greater collection and analysis of climate effects through macroeconomic statistics. They can provide longitudinal tracking of how the economy is impacted by climate change, enabling more targeted and evidence-based policy response. Knowing how climate-related shifts in productivity, employment, and capital flows influence the economy overall is needed in order to be able to design effective responses.

For example, if governments are better able to understand the effects of climate change on the productivity and health of their employees, they can direct investment in workplace climate management, education, and public health facilities. And if they better understand how climate risk affects agriculture and transport systems, they can direct subsidy reform, climate-resilient infrastructure investment, or farmer and small business support.
The study demands more application of fundamental macroeconomics within climate policy development. Although there is already some incorporation of environmental factors in current economic models, there is huge potential for expansion in how far, and to what extent, they are quantified and applied. To achieve this will necessitate increased harmonization between economists, environmentalists, and policymakers.

ESCAP also emphasizes that the economic impacts of climate change have to be recognized as a collective long-term problem. While the everyday impact may seem small, the aggregate impact over decades and across populations is gigantic. It has to be addressed by timely policy action with augmented data, modelling, and forecasting capacities.

The Economic and Social Survey of Asia and the Pacific 2025 arrives at the conclusion that GDP will continue to be an important economic indicator but is inadequate to measure the climate change risks and costs in isolation. The nations need to facilitate greater utilization of other macroeconomic indicators for planning sustainable and climate-resilient economic growth.

Source:

United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), Economic and Social Survey of Asia and the Pacific 2025