Climate Change Could Slash Global GDP 18% by 2100 as Economic Risks Spread Across Borders

OECD warns that climate change could cut global GDP per capita by 18.3% by 2100 under high emissions, with developing economies facing particularly severe losses from heat, floods, agricultural disruption and sea-level rise. Governments, development partners and businesses need faster investment in climate-resilient infrastructure, adaptation finance, diversified supply chains and labour mobility to contain economic damage and protect long-term development.

The global economic cost of climate change could become a major development and fiscal challenge unless governments, development institutions and businesses accelerate both mitigation and adaptation. An OECD Economics Department study using the Climate and Adaptation Spatial General Equilibrium Model (OECD-CASGEM) examines climate impacts across 927 regions and 11 economic sectors. It estimates that global GDP per capita could be 3% lower by 2050 and 6.3% lower by 2100 under the current-policy SSP2-4.5 scenario. Under the high-emissions SSP5-8.5 scenario, losses could reach about 5.9% in 2050 and 18.3% in 2100. The findings show that climate change is no longer only an environmental concern: it is increasingly a problem for productivity, investment, public finances, supply chains and long-term development.

From Extreme Heat to Floods: Where the Economic Damage Begins

The OECD model concentrates on four major climate risks: heat stress, flooding, deteriorating agricultural conditions and sea-level rise. Each affects the economy differently, but together they can weaken productivity, destroy capital and reduce the amount of productive land available.

Heat is particularly important because extreme temperatures reduce worker productivity across many industries. Firm-level evidence used in the study indicates that an additional day above 40°C is associated with almost a 0.2% reduction in annual productivity.

Flooding primarily damages physical capital. Research covering more than 2.5 million firms across 17 European and Asian advanced economies found that direct flood exposure reduced firms' capital stocks by an average of 2.7% during the four years following an event. Smaller companies suffered greater losses, underlining the vulnerability of businesses with limited finance, insurance and disaster-recovery capacity.

Agriculture faces declining productivity as temperatures, rainfall and other growing conditions change, while sea-level rise threatens productive land in low-lying coastal areas.

Developing Economies Face a Much Steeper Climate Bill

Climate losses will not be evenly distributed. OECD countries are projected to experience average GDP-per-capita losses of around 2.5% by 2050 and 9% by 2100 under the high-emissions scenario. Under current policies, the corresponding losses are around 1.7% and 3.1%.

The outlook is substantially more severe outside the OECD. The model estimates losses of approximately 7.2% by 2050 and more than 20% by 2100 under high emissions. Under the current-policy scenario, losses outside the OECD reach around 3.3% in 2050 and 6.7% in 2100.

These differences matter for development policy. Countries already struggling with limited fiscal space, infrastructure shortages and financing constraints may face the largest climate-related economic pressures.

For international development partners, adaptation finance therefore needs to complement mitigation finance. Multilateral development banks and bilateral agencies can support resilient transport, water and energy infrastructure, climate-smart agriculture, coastal protection, disaster financing and stronger social protection. Guarantees and blended-finance structures could also help attract private investment into adaptation projects that would otherwise struggle to secure commercial financing.

Supply Chains Can Turn Local Climate Shocks Into Global Losses

One of the study's most important findings concerns interconnected production networks. The model estimates that global GDP-per-capita impacts are about 78% larger when input-output linkages are included than when these connections are removed.

This means a flood or heatwave affecting one manufacturing centre can disrupt suppliers and customers far beyond the affected region. Companies dependent on concentrated supply chains could therefore face production delays, higher input costs and lost sales even when their own facilities are not directly exposed to extreme weather.

For businesses, climate-risk assessments should consequently extend beyond factories and offices to include suppliers, ports, transport corridors, energy networks and major markets.

The changing risk environment also creates opportunities. Demand could grow for climate-resilient infrastructure, cooling technologies, agricultural innovation, insurance, climate analytics, resilient logistics and disaster-risk management. Governments can support smaller businesses through better climate information, public guarantees, insurance mechanisms and disaster-contingent financing.

Adaptation Is Becoming Core Economic Policy

Trade and labour mobility can provide an important economic buffer. OECD-CASGEM estimates that allowing economies to adjust through trade and migration could reduce global GDP-per-capita losses in 2100 by roughly 8% under the high-emissions scenario. Such adjustments also reduce differences in climate losses across regions by approximately 22%.

The implication for governments is clear: adaptation should become part of mainstream economic planning. Authorities need resilient infrastructure, stronger building standards, better flood protection and climate-risk information, while policies supporting housing supply, worker mobility and social protection can help people move toward less affected regions and industries. Maintaining diversified and resilient trade relationships can similarly help companies replace disrupted suppliers.

International cooperation will also be essential because adaptation in one region can protect supply chains, consumers and businesses elsewhere. Public co-financing, insurance and cross-border risk-sharing can help finance projects whose benefits extend beyond individual jurisdictions.

The OECD cautions that its estimates may still understate the full economic cost of climate change. The model does not incorporate several major hazards, including tropical cyclones, hurricanes, typhoons, wildfires and landslides, while broader consequences for health, food security, biodiversity and ecosystems are largely outside its GDP calculations.

For policymakers, development institutions and investors, the message is therefore broader than an 18.3% potential global GDP-per-capita loss by 2100. Climate resilience is becoming a condition for economic resilience. Early investment in infrastructure, financial protection, flexible labour markets and diversified supply chains can reduce future losses, while delayed action risks leaving governments and businesses facing much larger and harder-to-manage economic shocks.