Do extreme weather events damage the German economy?

This paper presents findings of a study of the economic impacts of climate change adaptation. To estimate these impacts on the German economy and its individual sectors we follow a two-step approach: firstly, we estimate the damages resulting from recurring flood events and heat waves, based on simulations performed with the macro-econometric input-output model PANTA RHEI, secondly we include adaptation measures and analyze overall impacts (for the latter see Lehr & Nieters 2015). In the literature, so far, impacts of extreme weather events were estimated by using (1) Disaster Impact Models (DIM) or (2) flood damage estimation methods, which either concentrate on the effects of single events (1, 2) or are not suited to assess economic effects in detail (2). In our approach we integrate recurring extreme weather events as “shocks” into the model to answer the question if and how a rising number of extreme weather events in the future may influence Germany’s economic development. Two scenarios – one with and one without considering extreme weather events – are compared. Simulation results reveal slightly negative effects on individual economic sectors and Germany’s economy as a whole. However, these effects are slightly intensifying over time which could be an indication that recurring events may curtail economic growth in Germany.