The countries most and least prepared for the economic shock of climate change
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It's clear: the effects of climate change will touch all corners of the world. Our Climate Economics Index, which stress-tests how climate risks will impact 48 countries representing 90% of the world economy, demonstrates that there is a wide range of vulnerability between countries and regions.
The list below summarises which countries are the most and least prepared for the economic impacts of climate change. Notably, countries in south and southeast Asia are most affected by the physical risks associated with climate change.
The five least vulnerable countries:
As one of the northernmost countries in Europe, Finland will not experience notable productivity losses as a result of global warming.
The country's tourism industry could even benefit from the rising temperatures.
The main vulnerability is indicated by a relatively high wet climate risk score, which suggests an increase in occurrence of heavy precipitation events.
The economy in Finland will also benefit from the country's high existing level of adaptive capacity.
As a small land-locked country in the middle of the European continent, Switzerland is not exposed to the risk of sea level rise and is largely immune to the negative impact of gradual temperature increases.
The most notable climate risk is linked to the potential of wetter weather conditions that can lead to more heavy precipitation and river flooding.
As a global leader in infrastructure and green technology innovation, Switzerland ranks high on adaptive capability.
Similar to Switzerland as a small land-locked European country, Austria is not exposed to the risk of sea level rise, and it is largely immune to the negative effect of gradual temperature increases except for mild impact on human health. The most notable acute climate risk is the potential of more heavy precipitation and related river flooding risk. With a high degree of government effectiveness and R&D spending, Austria has a relatively high ranking of adaptive capacity.
Portugal is more shielded from climate impacts than some of its European neighbours. More specifically, Portugal is significantly less dependent on East Asia, which is more exposed to climate change, and less dependent on the US, which significantly reduces its imports. In addition, Portugal has a better diversified trade sector compared to the bigger European economies. However, Portugal only invests 1.37% of GDP on R&D spending, therefore its ranking of adaptive capability is lagging some of its European peers.
Sea level rise, coupled with storm surge and river flooding along the coastlines, poses a significant climate risk to Canada.
To varying degrees, Canada could lose a substantial amount of land from rising sea levels, which could otherwise have been used productively.
On the other hand, Canada is relatively shielded against productivity losses from heat stress or negative health impacts.
Located at higher latitudes, the country's agriculture and tourism industries may even benefit from rising average temperatures.
The five most vulnerable countries:
India's economy is highly vulnerable to multiple impacts from climate change.
Higher temperatures and more extreme drought events could severely reduce labour productivity as result of heat stress and health effects.
The agriculture and tourism sectors, which account for about 18% and 9% of total GDP in 2019 respectively, could also face significant economic damage.
Climate risks are exacerbated by the fact that India has, to date, put in place relatively low adaptive capacity. For example, so far no national climate adaptation plan or strategy has been adopted, and market surveys suggest that the population's risk awareness about climate change is still comparatively low.
Philippines, Malaysia, and Thailand
Similar to Indonesia, the rest of Southeast Asian (SEA) countries are exposed to the full range of physical climate risks. Already located in the hot regions, the gradually rising temperature and more extreme dry weather events will deal a hard hit on their GDP growth potential, including productivity impact on agriculture, manufacturing and the tourism service industry that these countries are heavily dependent upon for net exports. Due to the relatively low political stability, low risk awareness on climate change and limited public fiscal resources to build resilient infrastructure, these SEA countries (with the exception of Singapore) also rank weak in terms of adaptive capacity.
Indonesia is exposed to the full range of physical climate risks, including sea level rise.
Both dry and wet weather extremes could impact agriculture yields (drought and flooding), and heat stress weighs on labour productivity.
More extreme weather conditions will also take their toll on the tourism sector, on which Indonesia heavily relies.
Given the fiscal and public resource constraints on investment, the level of adaptive capacity in Indonesia is among the lowest of the sample countries, adding to its overall vulnerability to climate change effects.