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Abstract

The early 2020s have illuminated how rising temperatures and intensified weather extremes can affect many different areas of life, thus costing us a lot—immaterial costs and actual money. This is just a preview of a world in which global mean temperature could be 3 degrees higher than in pre-industrial times and in which weather extremes would be even more frequent and intense. But what is the total economic impact of climate change? How can it be separated from that of other crises and events? What are plausible effects in different sectors, how do they interact and how do they affect macroeconomic growth in the short- and long-run? In this chapter, we shed light on these questions. Based on the current state of science, we present and discuss various transmission channels from the physical impacts of climate change to the economy, including potential interaction effects, and outline possible consequences and risks for the economy as a whole. A guiding question for these discussions is how future damages can credibly be estimated.