EUROPEAN COMMISSION
Brussels, 27.10.2026
SWD(2026) 731 final
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT REPORT
EU Framework for Climate Resilience
Accompanying the document
Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
establishing a framework to enhance climate resilience and amending Regulation (EU) 2018/1999 (European Climate Resilience Law)
{COM(2026) 730 final} - {SEC(2026) 730 final} - {SWD(2026) 730 final} - {SWD(2026) 732 final}
ANNEX 8: Projected climate impacts and consequences; potential benefits of climate resilience
This annex provides additional examples of evidence regarding the risks and plausible impacts of climate change and potential benefits of climate resilience.
Projected climate impacts and consequences
For more details on the risks and impact chains, as well as extensive references to evidence, the European Climate Risk Assessment (EUCRA)
provides a comprehensive presentation. The economic costs of climate change, including cost of inaction, have also been detailed in the Impact Assessment report accompanying the Commission Communication “Securing our future” (SWD (2024) 63 Final).
It is important to note, as highlighted in the Cross-Working Group on Economic Impacts from Climate Change in the IPCC AR6
and recent literature
, that economic climate damage projections diverge significantly based on the chosen methodology, presenting a challenge for policy planning. Structural models that aggregate losses across specific sectors typically project lower global GDP impacts of 1% to 5% at 3°C of warming. In contrast, macro-statistical models, which capture historical sensitivities of productivity to temperature, project far more severe systemic shocks with losses potentially exceeding 20%. While structural models offer causal clarity but often omit non-market and compounding risks, the macro-statistical approaches attempt to capture broader systemic vulnerabilities but fail to account for complex spatial correlations in economic data.
The evidence provided in this Impact Assessment primarily reflects structural models, and such results can be considered a conservative reference point. Nevertheless, the GDP impacts from such models are comparable to recent economic crises, while climate damages would be a persistent negative impact, as for example underlined in the ECB supervisory priorities for 2026-2028, which consider climate risk a permanent shock heading in one direction only, with serious long-term effects on house prices and other asset values.
While not cited here in more detail, emerging evidence also points to climate impacts driving inflation primarily through supply-side disruptions (destroying crops, capital/infrastructure impairments, reduced labour productivity, increasing insurance premiums
), which creates upward price pressure (particularly in food) that can be non-linear, persistent, and difficult for regulators to offset through conventional monetary policy tools
.
Macroeconomic impacts
Climate impacts are already causing significant damage and disruption to Europe’s economy, both in areas already identified as vulnerable and in new regions. Economic shocks Climate-related events cause economic shocks - both extreme events and structural climatic changes that depress growth potential. Such shocks undermine productivity, depress economic growth, pose risks to financial stability through increased potential credit defaults and losses, and higher or even prohibitive insurance premiums and heighten fiscal sustainability risks.
The below presents historical evidence on climate-related losses and projected increase in impacts.
Annual economic losses caused by weather-and climate-related extreme events in the EU Member States
Source: EEA
While cumulative losses from weather- and climate-related extremes in the EU have reached an estimated EUR 822 billion since between 1980 and 2024, roughly one quarter of these losses occurred in just the past five years.
Projected GDP impacts
Conservative estimates indicate that climate damages could cost EU GDP by up to 1% annually already in the next few years, with damages strongly increasing afterwards, reaching up to 2.3% of EU GDP by mid-century, and possibly getting much higher in only a few decades in case of uncontrolled climate change with estimates for the EU reaching 7% by the end of the century.
At the same time, research indicates that macroeconomic damages from climate change could be one order of magnitude larger than previously thought and 1°C warming reduces world GDP by over 20% in the long run
.
Example of damage functions as used in Integrated Assessment Models
Source: van der Wijst et al. (2023)
, as presented in Figure 31 of SWD(2024) 63 final, Part 2/5, Annex 7
Fiscal impacts
Climate change is recognised as a significant source of macroeconomic and fiscal risks, which means that its macro-fiscal impacts need to be assessed and integrated into national budgetary frameworks. For example, the risk to sovereign credit quality and debt financing rates, and interaction with financial stability, is also recognised in the Financial Stability Review
. This is also confirmed by the recent amendments to the Council Directive 2011/85/EU
, introducing new requirements for Member States to assess and disclose information, to the extent possible, on how climate-related macro-fiscal risks may affect the medium- and long-term sustainability of public finances, on disaster- and climate-related contingent liabilities, and on the fiscal costs incurred due to disasters and climate-related shocks. The methodologies for assessing the levels of risk are evolving
.
Below examples indicate the transmission channels and connections of climate risks to fiscal space, and projected impacts on debt-to-GDP ratios.
Transmission channels of climate risks to the economy and public finances (non-exhaustive)
Source: Salmon-Genel (2025),
Assessing the Macro-Fiscal Risks from Climate Change: Concepts, Methodological Approaches, and Insights from Country Practices.
. See similar:
The Fiscal Impact of Extreme Weather Events: Stress Tests for EU Countries
Climate damages and impact on Debt-to-GDP ratios
Source:
Policy options to reduce the climate insurance protection gap
Source:
The Fiscal Impact of Extreme Weather Events: Stress Tests for EU Countries
Net Fiscal Impact in 2050: No-Further-Action’ (NFA) scenario vs ‘Net Zero’ (NZ), % GDP
Note: The net fiscal impact (% of GDP) is given by the difference in primary balance (and its sub-components) between the NZ and NFA scenarios for the EU aggregate. Negative values reduce fiscal pressure; positive values increase fiscal pressure. Projections shown in Figure 1 assume a 10% uptake of investment needs by the public sector. In Panel A (left), an output-driven revenue approach is followed. In Panel B (right), an output-driven revenue approach is combined with assumptions on structural energy-tax base erosion.
Source: Gagliardi (2025),
The Macroeconomic and Fiscal Impact of Climate Change: A Stylised approach
Insurance impacts
The insurance markets play an important role in managing climate risks, notably through encouraging resilience measures through price signals, and risk transfer. At the same time, as shown for example in the Final Report of the Climate Resilience Dialogue
it is not currently fulfilling these functions to its potential, and the share of insured economic losses related to natural catastrophes in Europe is low and could decline in the medium to long term
.
Below examples show the role of insurance in the management of financial risks in the society, economic losses from natural catastrophes, the climate insurance protection gap, and potential benefits of resilience measure.
Role of insurance in managing financial climate risks
Economic losses from and number of natural catastrophes in the EU
Source:
EIOPA/ECB
The share of insured economic losses related to natural catastrophes in Europe
Example of financial exposure with and without adaptation measures
Source: ECB
Infrastructure impacts
Cited from EUCRA, chapter 15.3. Forzieri et al. (2018), for instance, whose analysis of current risks to European infrastructure was presented in Table 15.1 above, estimated future financial risks for different infrastructure systems to 2080 (see Figure 15.2). They found that while the economic annual damage (EAD) to European infrastructure in the 2000s was EUR 3.4 billion, it could rise to EUR 9.3 billion by the 2020s, EUR 19.6 billion by the 2050s and EUR 37.0 billion by the 2080s. Large increases in transport risk are also underlined by, for example, the JRC PESETA IV project (Bubeck et al. (2019), Alfieri et al. (2017) and Christodoulou et al. (2019)). It should be noted that these model results refer to annual averaged damage. Damage in individual years, and even from individual events, can be higher than the values indicated above. Furthermore, the model results likely underestimate actual damage as this study was unable to consider more recent evidence on the increase in downpours and pluvial floods as a result of climate change.
