22. Climate Change Impacts at the National Level: Known Trends, Unknown Tails, and Unknowables

Economists attempting to evaluate the impacts of climate change are often caught between hard theory and exceedingly rocky empirics. Impact assessment models are necessarily based on highly aggregated—and sometimes highly simplified—damage functions. This study takes an alternative approach: a bottom-up, physical impact assessment and respective monetisation, attempting to cover a much broader set of impact fields, feeding directly into a macroeconomic and welfare analysis at the national level. To ensure consistency, our approach applies impact assessment at the sectoral impact chain level using shared socioeconomic pathways, consistent climate scenarios, computable general equilibrium evaluation, and non-market impact evaluation. The approach is applied to assess a broad scope of climate impacts in Austria. Results indicate significant impacts around ‘known knowns’ (such as changes in agricultural yield from climatic shifts), with uncertainty increased by ‘known unknowns’ (e.g. changes in water availability for irrigation, changes in pest and diseases) but also raises the question of unknowns and unknowables, which may possibly dominate future impacts (such as exceedance of critical ecosystem function for supporting agriculture). Climate change, ultimately, is a risk management problem, where insurance thinking warrants significant mitigation (and adaptation) action today.