What Can We See About Climate Change in Macroeconomic Data?

By Michał Podolski
BANGKOK, Thailand, Jun 10 2025 – Year by year researchers improve and deepen our understanding of economic activity. The primary example, and probably the most commonly used, is the detailed data and analysis available on gross domestic product (GDP).

Yet, it is merely one of several measures of economic activity and development used by researchers, economists and policymakers. As no one would describe the weather solely by temperature when a storm is developing, focusing solely on GDP when analysing the economic impact of climate change and climate action would be far from adequate.

And this is where many of us, whether policymakers, researchers or citizens who care about the economic impacts of climate change, must wonder: what are the other macroeconomic indicators to use?

This is also what ESCAP’s Economic and Social Survey of Asia and the Pacific 2025 report sheds more light on.

There is plenty of reliable information on different economic sectors and spheres of economic activity. Productivity, employment, technological adoption or capital investment are just some most looked at. Besides economic performance, these indicators also can reveal how climate change affects economies at the grassroots level – where people work and businesses operate.

However, this information is often hidden and difficult to notice due to the complexity and vastness of climate-economy impact channels.

For instance, economy-wide productivity tends to rise until we reach certain temperature level. The “optimal level” is currently estimated at around 13°C on average during a year. Why? The impact of too low or high temperatures is not just that people work less efficiently in extreme cold or heat.

For example, in agriculture, higher temperatures impact plant growth, therefore agricultural productivity. As temperatures shift, farmers need to adopt new crops or farming techniques, but they are often lacking the skills or financial resources to adapt to new reality.

Rising temperatures also facilitate the spread of diseases, such as dengue, which is now appearing further towards North than before.

Once ill, people are unable to work. With higher temperatures, children may miss school or struggle to concentrate and learn. The effects of worse education may not be clearly visible in today’s productivity data but will manifest in decades to come.

Similarly, extreme weather events, driven by rising temperatures, not only cause significant infrastructure damage but also reduce productivity through seemingly trivial issues like traffic jams. Even a 15-minute delay becomes significant when it occurs regularly to millions of people.

Such disruptions increase transportation costs, necessitate larger inventories and reduce capital productivity, particularly in manufacturing. Hotter, more humid conditions also cause machinery to fail more frequently.

The hidden and less intuitive impact channels extend far beyond the already simplified yet still complex overview shared above. For example, lower productivity reduces wages and household incomes, which in turn limits households’ ability to save.

Smaller domestic savings hold back business expansion and job creation, as well as push up borrowing costs. At the end, securing a mortgage may become more challenging while house construction itself is more costly – all just because of some hotter or wetter conditions.

Although the above impact channels are well-documented, reasonable and logical, there are still massive research gaps on their exact scale, intensity, and local impact. For example, the Intergovernmental Panel on Climate Change in its climate report compiled by hundreds of researchers spanning climate science, biology, geography, economics and social sciences in 2022, concluded, “Projected estimates of global aggregate net economic damages generally increase non-linearly with global warming levels. The wide range of global estimates, and the lack of comparability between methodologies, does not allow for identification of a robust range of estimates. (…) Economic damages, including both those represented and those not represented in economic markets, are projected to be lower at 1.5°C than at 3°C or higher global warming levels.”

To put it simply: we know that climate change negatively impacts economies, and we know that the impact worsens with greater warming. However, we cannot yet determine whether the economic impact of climate change will be mild, severe or catastrophic – this requires further research, in particular on localized impact.

Those who view the climate change impact channels described above as remote from everyday concerns and assume that their effects are negligible, may wonder about their long-term aggregate impact: losing even a small amount of money every day, by everyone, for decades or even centuries to come adds up to tremendous amounts.

Therefore, even if with climate change, we all lose, informed policy action can lower these loses, and macroeconomic indicators are one of the tools that help and still have lots of potential to improve climate action.

Given the above considerations, as ESCAP’s Economic and Social Survey of Asia and the Pacific 2025 report argues, we need not only a more comprehensive understanding of climate change and economy nexus but broader and more common use of the current macroeconomic findings.

The report contributes to this conversation by examining how the economic impacts of climate change and climate action are reflected in macroeconomic indicators, outlining what can and should be done to better navigate the climate storm.

IPS UN Bureau

Excerpt:

Michal Podolski is Associate Economic Affairs Officer, ESCAP