This study evaluates the global economic consequences of physical climate risks under two climate scenarios. We estimate the historical changes in total factor productivity growth due to the exposure of a global sample of firms from 48 countries to chronic climate risks (gradual changes in temperature and precipitation) and extreme climate risks (heatwaves, coldwaves, droughts, and floods).

We project the changes in productivity and physical capital for the firms in response to the climate risks under different climate scenarios up to 2100. The macroeconomic impact of the aggregated country and sector-level climate shocks are then assessed within the multi-country, multi-sector, intertemporal general equilibrium model: G-Cubed. The results indicate that there are substantial losses to all the economies under the climate scenarios, and the losses increase with global warming.