Climate change impacts on overall economy in the Baltic Sea Region (BSR)

The potential to project future outlooks for industries, settlements and societies taking climate change into consideration are limited by the uncertainties to predict e.g. trends in socio-economic development, technological and institutional changes (IPCC, 2007a). Until now, the focus in research has therefore been vulnerabilities to impacts rather than attempts to perform projections of climate change impacts (ibid). Further, there are relatively few studies about climate change impacts on economy (Wei and Aaheim, 2010). The reasons could be, again, uncertainties about the consequences of climate change but also ignorance, difficulties in quantifying the impacts in economic terms and that it is time-consuming to develop appropriate tools (ibid). A number of studies dealing with Gross Domestic Product (GDP), Gross National Product (GNP), global economy sector-vice and tourism were nevertheless found for this compilation (van der Linden and Mitchell, 2009; Swedish Commission on Climate and Vulnerability, 2007; Wei and Aaheim, 2010; EEA, 2008).

The summary of the impacts on overall economy are presented in Table 1. For further details about the each subsection and specific studies, click on the links below the table. For tips on how to interpret the information in the table, see the Swedish example on the right.

Table 1. Climate change impacts on overall economy in the BalticClimate countries – a summary of general outlooks for the found impact scenarios interpreted from different scientific studies
(↑↑ Considerable increase; ↑ Slight increase; ↓↓ Considerable decrease; ↓ Slight decrease; ○ No or insignificant change; ~ Outcome very uncertain; ~↑ Outcome uncertain, increase tendency; ~↓ Outcome uncertain, decrease tendency; ─ Not included in the analysis) 

Climate change impacts on:








Gross National Product
Summer tourism ↑↑ ↑↑ ↑↑ ↑↑ ↑↑

For examples of impact scenarios reviewed from different scientific papers/reports, see the following subsections:

Gross National Product (GNP) development (Sweden)
Gross Domestic Product (GDP) implications (Global)
Global economy per sector
Tourism (Europe)


Gross National Product (GNP) development (Sweden)

The EMEC (Environmental Medium Term Economic mode) model is a general equilibrium model for the Swedish economy which has been used to simulate the GNP development in Sweden (Östblom et al., 2007). The environment and economy interact in the model to make it possible analyze the economic implications of different environmental policy measures. Economic scenarios, based on downscaled SRES scenarios and the National Institute of Economic Research, illustrate the GNP development in Sweden until 2025 (Figure 1).

 The GNP is projected to increase until 2025 for all emission scenarios. No major differences among the different emission scenarios are seen until 2025. However, after 2050 there are rather big differences in GNP depending on emission scenario (Swedish Commission on Climate and Vulnerability, 2007). A general projection of GNP development in Sweden is illustrated in Table 2, interpreted from the results in the report by the Swedish Commission on Climate and Vulnerability (2007).


Figure 1. Projected GNP in Sweden until 2025 along with the SRES emission scenarios (Fig. 4.56 in Swedish Commission on Climate and Vulnerability (2007) , based on data from CIESIN (2002) and calculations in Östblom (2007)) 

Table 2. General outlook for GNP related to climate change
(↑ Slight increase; ─ Not included in the analysis)

Change ─ 

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Gross Domestic Product (GDP) implications (Global)

An investigation of socio-economic responses to a set of climate shocks has been performed in relation to the ENSEMBLES (2009) project. The ‘indirect or higher-order costing’ method was implemented. This method models the impacts of climate change on economic systems and in turn triggered socio-economic reactions. It illustrates the market interactions in the world economy through exchanges of inputs, goods and services responding to changes in relative prices caused by climate shocks which are caused by a temperature increase. A recursive dynamic equilibrium model called ICES (Intertemporal Computable Equilibrium System) was used in the analyses.

The climate shocks were calculated assuming 1.2 °C increase in temperature in 2050 compared to 2001 (consistent with SRES A2). The climate shocks were obtained using “extrapolation and meta-analysis of existing literature, inputting to reduced-form modules linking temperature change and physical impacts” (van der Linden and Mitchell, 2009, p. 132). The result comprised the entire globe where the Eastern and Western Europe are interesting in terms of the BSR (Table 3).

Table 3. Climate change impacts, calculations from environmental impacts interface modules (Table 10.1 in van der Linden and Mitchell (2009))

Climate change shocks for 1.2 ºC temperature increase (2050)
Percentage change with respect to 2001

Region Health Agriculture (land productivity) Sea Level Rise
Wheat Rice Cereal
Land Loss
USA -0,002 -0,196 -0,022 1,650 1,277 -2,190 0,026
Western Europe 0,082 -0,390 -0,015 0,951 1,858 -1,577 0,015
Eastern Europe and Former Soviet Union 0,104 -0,417 -0,009 5,027 2,784 -1,258 0,008
Japan 0,085 0,043 0,001 0,298 0,996 -2,297 0,073
Rest of Annex I countries 0,097 -0,264 -0,013 10,909 7,938 4,694 0,003
Energy exporter countries -0,243 1,307 0,080 4,351 3,525 0,726 0,067
China and India 0,025 -0,078 -0,001 5,227 3,802 0,692 0,040
Rest of the world -0,190 1,019 0,094 -1,239 -1,451 -4,197 0,104

Climate change shocks for 1.2 ºC temperature increase (2050) (cont.)
Percentage change with respect to 2001

Region Tourism Energy Demand
  Demand Income
Coal Nat Gas Oil Products Electricity
USA -0,82 -68 327,92 104,85 -34,39 -3,15 -2,52
Western Europe 1,08 72 024,59 71,17 -17,78 -18,98 -9,08
Eastern Europe and Former Soviet Union -2,34 -11 578,35 98,26 -32,81 -3,03 -0,56
Japan 7,87 281 252,04 99,25 -31,95 -2,71 0,06
Rest of Annex I countries 0,95 11 314,12 14,43 -23,18 -9,68 -10,96
Energy exporter countries -5,11 -142 800,34 1,28 0,00 -2,03 6,35
China and India -1,27 -6 394,80 64,55 -23,20 -2,06 5,98
Rest of the world -5,13 -135 489,36 50,13 0,00 -2,55 64,69

* in 2001 US$ million 

The economic implications of the climate change shocks in Table 3 are shown in Figure 2. Eastern Europe follow the average World development of climate change impacts on GDP; stable until the 2030s and a slightly decrease after the 2030s by about -0.2% in the 2050s. Climate change is projected to have no notable impacts on the GDP until the 2050 in the Western Europe.

Figure 2. Simulated macro-regional GDP change due to climate change effects. USA - United States of America; EU - Western Europe; EEFSU - Eastern Europe and Former Soviet Union; JPN - Japan; RoA1 - Rest of Annex I countries; EEx - Energy exporter countries; CHIND - China and India; RoW - Rest of the world  (Fig. 10.3 in van der Linden and Mitchell (2009)) (click to enlarge)

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Global economy per sector

Wei and Aaheim (2010) studied the climate change impacts on the global economy. The objective was to assess the economic impacts of the E1 climate scenario on the global economy. The E1 climate scenario corresponds to a temperature increase of +2 °C in 2100 and was developed for ENSEMBLES (2009). The general equilibrium model, GRACE, was used in this study. The climate change impacts on specific activities, for example, the productivity of land in agriculture and forestry, the productivity of oceans in the fisheries, or the demand for heating energy are modelled by this general equilibrium model. GRACE accounts for eight regions and 11 sectors, where Europe is one of the regions. 

The GRACE modelling of climate change impacts on the economy was based on nine impact functions. Conversely, most integrated models aggregate all impacts into one estimate; all impacts represented by one damage cost function only.
The calibration of the nine impact functions was based on interpretations of a collection of studies.
  The average of 10 GCMs driven by the E1 scenario and no climate impacts was modelled to create a reference scenario. Thereafter, the nine impact-functions where implemented in the run resulting in impact scenarios.

Wei and Aaheim (2010) stressed that the result of their report illustrates how the economy will be affected if the direct impacts will be described as the nine impact-functions, rather than the true impacts of climate change. 

Figure 3 shows the changes in prices between the impact scenario and the reference scenario by sector and region over the period 2010-2100 for entire Europe and Russia. No specific result can be deduced for the BSR since macro-regional modelling was performed. (the last sentence was deleted)

Figure 3. Changes (%) in price between reference and impact scenarios for 2010-2100 (Fig. 4 in Wei and Aaheim (2010)) (click the figures to enlarge)

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Tourism (Europe)

The climate change effects on summer tourism in Europe has been investigated in a project called PESETA (2007). The Tourism Climate Index (TCI) was used to assess climatic suitability for summer tourism in Europe. Temperature, humidity, sunshine, rain and wind were taken into account in the TCI. The climate data used was monthly data for 1961-1990 and 2071-2100 calculated by two regional climate models, HIRHAM driven by HadAM3H A2 and RCAO driven by ECHAM4 A2. The climate scenarios were used to compute the TCI values and the TCIs was aggregated into seasons (PESETA, 2007).

The expected future summer tourism conditions are mapped out in Figure 4. Most of the regions in the BSR have, according to this study, very good conditions for summer tourism today. However, the conditions for the BSR are projected to be even better in the future. The projections for the future indicated that there will be more regions with excellent conditions and many northern regions with currently acceptable or good conditions will to turn into very good conditions. A general projection of future summer tourism in the BSR is illustrated in Table 4, interpreted from the results in EEA (2008).

Figure 4. Projected conditions for summer tourism, Europe 1961-1990 and 2071-2100 (Map 7.6 in EEA (2008)) (click to enlarge)

Table 4. General outlook for the summer tourism comfort index
(↑↑ Considerable increase; ↑ Slight increase; ↓ Slight decrease)

Change ↑↑ ↑↑ ↑↑ ↑↑ ↑↑

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Look at the impacts on other sectors:

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» Energy
» Housing and water
» Forestry
» Health
» Natural environment