GDP Loss Research Articles

An Interim Economic Evaluation of Sweden’s Initial COVID-19 Strategy

Sweden adopted a softer public health COVID-19 strategy than most countries by relying on recommendations rather than restrictions. Here we focus on the effects of this choice on the economy (GDP), number of deaths and severe illnesses by comparing Sweden to a comparison group consisting of Denmark and Norway, two countries similar in many aspects to Sweden but that have differed from it in terms of COVID strategies. The Swedish policy resulted in a net loss of USD 27.3 billion (USD 2,650 per capita) stemming mostly from relative loss in GDP (83% of total). Our findings suggest that the costs of the strategy in the form of (monetized) excess deaths and severe illness cannot be justified by benefits in the form of a better economic performance.

Representative CO2 emissions pathways for China's provinces toward carbon neutrality under the Paris Agreement's 2 °C target

China has committed to achieving carbon neutrality by 2060. It is essential to develop representative CO2 emissions pathways at the provincial level that align with the national target to facilitate effective policy implementation and scientific research. To address inconsistencies between provincial aggregate emissions and national estimates, this study compares the 2021 CO2 emissions estimates of China's provinces from the bottom‒up emissions factor method and the top‒down atmospheric CO2 concentration inversion method. We find that these methods yield comparable results for the emissions from energy combustion and industrial processes at the provincial level. Based on a review of existing research on CO2 pathways for China's provinces, we propose a set of representative pathways for China's provinces. These pathways align with past practices of allocating national emissions intensity reduction targets to provinces and are consistent with the national Tsinghua‒CMA pathway. The proposed pathways require provinces to sequentially peak their emissions by 2030, followed by rapid emissions reduction. Compared to a reference scenario without the carbon neutrality target, these pathways would incur an estimated cumulative GDP loss of about 1% between 2020 and 2060. However, there are notable regional variations, with some regions in the northwest potentially experiencing higher economic growth due to the availability of high-quality low-carbon resources. We recommend that China enhance provincial-level CO2 emissions accounting by cross-validating bottom‒up and top‒down methods. Additionally, careful consideration should be given to aligning provincial targets with national and global commitments when updating pathways toward carbon neutrality.

Impairing Globalization: The Russo-Ukrainian War, Western Economic Sanctions and Asset Seizures

The potency of economic sanctions imposed on nations depends on demand and supply adjustment possibilities. Adverse GDP impacts will be maximal when import, export, production, distribution and finance are inflexible (universal non-substitution). This paper elaborates on these conditions and quantifies the maximum GDP loss that Western sanctions could have inflicted on Russia in 2022–2023. It reports the World Bank’s predictions, contrasts them with the results and draws inferences about the efficiency of Russia’s workably competitive markets. This paper shows that Russia’s economic system exhibits moderate universal substitutability and is less vulnerable to punitive discipline than Western policymakers suppose. The likelihood that economic sanctions will compel the Kremlin to restore Ukraine’s territorial integrity ceteris paribus is correspondingly low, even though war reduces Russia’s quality of existence. Western economic sanctions serve narrow geostrategic ends that are reconcilable with Pareto-efficient free trade and globalization, if precision-targeted, but as the Russo-Ukrainian war intensifies, an expanded array of novel and dubiously legal sanctions is degrading free trade, and spurring de-globalization and anti-Western coalitions. If this armed combat is prolonged, the goals of free trade and globalization could be set back for decades.

The global macroeconomic burden of Alzheimer's disease and other dementias: estimates and projections for 152 countries or territories

Alzheimer's disease and other dementias (ADODs) severely threaten the wellbeing of older people, their families, and communities, especially with projected exponential growth. Understanding the macroeconomic implications of ADODs for policy making is essential but under-researched. We used a health-augmented macroeconomic model to calculate the macroeconomic burden of ADODs for 152 countries or territories, accounting for: the effect on labour supply of reduced working hours of informal caregivers; the effect on labour supply of ADODs-related mortality and morbidity; age-sex-specific differences in education, work experience, labour market participations, and informal caregivers; and treatment and formal care costs diverting from savings and investments. ADODs will cost the world economy 14 513 billion international dollars (INT$, measured in the base year 2020; 95% uncertainty interval [UI] 12 106-17 778) from 2020 to 2050, equivalent to 0·421% (95% UI 0·351-0·515) of annual global GDP. Japan incurs the largest annual GDP loss at 1·463% (1·225-1·790). China (INT$2961 billion [2507-3564]), the USA (INT$2331 billion [1989-2829]), and Japan (INT$1758 billion [1471-2150]) face the largest absolute economic burdens. The economic burden of informal care ranges from 60·97% in high-income countries to 85·45% in lower-middle-income countries, and treatment and formal care costs range from 10·50% in lower-middle-income countries to 30·80% in high-income countries. The macroeconomic burden of ADODs is substantial and unequally distributed across countries and regions. Global efforts to reduce the burden, especially with regard to informal care, are urgently needed. National Institute on Aging, National Institutes of Health; Chinese Academy of Engineering; Chinese Academy of Medical Sciences; Bill & Melinda Gates Foundation; Davos Alzheimer's Collaborative through Data for Decisions.

No pain, no gain? Simulation of carbon reduction potential and socioeconomic effects of voluntary carbon trading in China during 2021–2060

Voluntary carbon market has become a key mechanism of stimulating carbon emission mitigation actions globally. In this study, we calculate the emission reduction potential of Carbon Generalized System of Preferences (CGSP), a dominated voluntary carbon trading mechanism in China, including on-going projects of forestry carbon sinks, waste clothes reuse, installation of distributed photovoltaic power generation system, and usage of energy-conserving devices, as well as other extended methods for their future mitigation potentials. We employ a computable general equilibrium model to delve into the effects of CGSP mechanism on carbon price, economic growth and household consumption, assessing its impact on the equitability of social welfares between urban and rural residents during 2021–2060. Our results indicate that employing the current methods for CGSP would lead to around 5.0 Mt CO2 reduction annually. since 2018, whereas adopting the extended methods would yield reductions of 157.1 Mt. Promoting forestry carbon sinks and energy-conserving appliances offers the most prominent emission reduction, while low-carbon travel shows the biggest potential going forward. CGSP will loosen carbon constraints on industries in the market and result in a lower carbon price, reducing the economic cost of carbon trading without compromising China's carbon peaking and carbon neutrality goals. Supplementing CGSP could reduce the GDP loss by up to 0.2 trillion Yuan by 2030 and 0.9 trillion Yuan by 2060, compared to the sole operation of compliance carbon trading market. Provided fiscal stimulus policies, CGSP will further reduce GDP loss by 1.1 trillion Yuan in 2060. Different fiscal stimulus scenarios have a strong implication on welfares of urban and rural residents, wherein monetary equivalent incentive will reduce urban-rural income gap by up to 718 Yuan/capita in 2060.

Low-, moderate-, and high-risk obesity in association with cost drivers, costs over the lifecycle, and life expectancy

BackgroundThe prevalence of low-, moderate-, and high-risk obesity has been increasing globally. Our aim was to estimate the societal burden of these three obesity classes in the Austrian population by taking a societal–annual perspective and an individual–life-cycle perspective. Secondly, we sought to identify the respective cost drivers and the effects on life expectancy.MethodsWe used population-weighted survey data on the distribution of body mass index (BMI) and data on relative risks regarding 83 diseases. Using fractional polynomial regressions, we estimated relative risks per BMI unit for about 30 cost-intensive diseases up to BMI values of 50. The approach for the cost analysis was based on the use of population-attributable fractions applied to direct medical and indirect cost data. Macro-disease-specific data regarding cost factors came from cost-of-illness statistics and administrative sources.ResultsAbout 8.2% of deaths and 4.6% of health expenditure are attributable to obesity in Austria in 2019, causing 0.61% of GDP loss. A third of annual direct and indirect costs came from class 2 and class 3 obesity. From an individual perspective, life-cycle costs of class 2 and class 3 obesity were 1.9 and 3.6 times the costs of class 1 obesity, respectively. At the age of 45, people with high-risk obesity are about to lose approximately 4.9 life years and 9.7 quality-adjusted life years.ConclusionsWe have extended the method of population-attributable fractions, allowing us to estimate differences in the life-cycle direct medical and indirect costs between low-, moderate-, and high-risk obesity. We found that the lifetime costs of obesity are strikingly different between obesity classes, which has been veiled in the societal—annual perspective. Our findings provide a foundation for evaluating public health interventions aimed at combating obesity in order to mitigate the escalating individual and societal burden resulting from obesity prevalence and complications in the future.

An economy-wide and environmental assessment of an imported supply shortage for iron ore: The case of China

Recently, geopolitical conflicts continue to intensify, with profound effects on global supply security of key mineral resources. Considering China's high dependence on foreign iron ore, once there is an import shortage, what impacts will it have on China's macro-economy and environment? Thus, using a computable general equilibrium model, this study introduced import supply disruption behaviour to assess the economy-wide and environmental effects of a large-scale iron ore import shortage on China. Furthermore, two supporting measures of enhancing upstream mining and cancelling steel import tariffs were constructed. The results demonstrated that an import shortage of iron ore will generate a negative effect on China's GDP and household welfare, wherein the higher the disruption degree, the greater the negative effect will be, and the maximum loss of GDP is 5.6 % in 2035. Secondly, total energy demand has reduced obviously, and the largest decline is 8.8 % in 2035. Particularly, the coal demand is most negatively affected by GDP loss, shrinking by up to 11.4 % by 2035. Meanwhile, the oil and gas demands have also dropped to some degree. Thirdly, the import disruption will help to reduce carbon emissions (by up to 9.9 % in 2035), but also have obvious environmental benefits. Finally, both measures will help alleviate the negative socio-economic impacts; however, the overall effects will be better if enhancing upstream mining is complemented by carbon pricing.

Compound hazard mapping for tropical cyclone-induced concurrent wind and rainfall extremes over India

India is the worst affected region in the world by tropical cyclones (TCs), causing an average 2% annual GDP loss. TCs instigate many other natural hazards that have a compounding effect on the adversely affected population and present significant challenges to the resilience of emergency response systems and infrastructure. Hence, any risk assessment on TC is inherently multivariate/compound in nature. This study investigates co-occurring wind and rainfall extremes during TCs across India (1979–2020) using a novel quasi-Lagrangian approach, focusing on location-specific hazards. Eastern coastal states and adjacent inland areas experience the highest frequency (≥10 cyclones in 40 years) of concurrent extremes (wind gusts ≥ 16 m/s and rainfall ≥ 18 mm/h). Whereas duration-wise, the eastern coastal states and Gujarat state experience frequent concurrent extremes lasting more than a day annually, with the Krishna–Godavari delta region particularly vulnerable to highly severe events (duration of concurrent extremes ≥ 24 h). This study provides a high-resolution cartographic product of compound hazard from TC-induced extremes for the first time over the entire India, highlighting regional heterogeneity and aiding targeted national-level risk mitigation and adaptation planning.

Economic consequences of inland waterway disruptions in the Upper Mississippi River region in a changing climate

Inland waterway locks have become significant bottlenecks in waterway networks worldwide due to the disruptions caused by aging infrastructure and climate change. While these locks have traditionally received attention for traffic issues, the disruptive impact on the regional economy remains unclear. This study addresses this knowledge gap by assessing the economic impacts of inland water transportation system failures, specifically focusing on disruptions in agricultural commodities within the Upper Mississippi River–Illinois River (UMR–IR) region. These disruptions encompass both unscheduled climate-induced extreme weather events and scheduled maintenance and repair work due to internal system failure. To capture the spatial interdependence between the regional economy and shipping rate changes caused by disruptions, we developed an integrated modeling approach. This approach combines spatial econometric modeling and multi-regional computable general equilibrium modeling techniques. Detailed weekly data from 2013 to 2021, including variations in inland barge rates and environmental conditions, were utilized. The assessment reveals that lock closure events in the UMR-IR region have severe economic consequences, impacting both the region itself and beyond. Conversely, transportation resilience achieved through modal substitution from barge to rail services during disruptive events can substantially reduce GDP losses. Specifically, such resilience measures can reduce GDP losses in the UMR-IR region by 6.6–24.2% and in the rest of the USA by 5.2–19.5%. Overall, these research findings carry significant implications for future planning and investment in inland waterway systems.

Incentive policies to realize large-scale deployment of CCS in China's power sector and its economy-wide impacts

Given the carbon capture and storage (CCS) technology is still in the demonstration phase, large-scale deployment of CCS is urgently needed in the coming decades, especially in the power sector. Therefore, we built a computable general equilibrium model with detailed electricity technology module and assessed the economy-wide impacts of multiple incentive policies on large-scale deployment of CCS in the power sector. Results show that, first, if only CCS is subsidized, without supplementing carbon pricing, it will lead to deviations from the core environmental objectives of CCS development. Secondly, when CCS subsidies are combined with carbon pricing, if the sectoral indirect tax is reduced, the GDP loss can be better alleviated, and it can also have an obvious positive impact on energy conservation and emission reduction. Finally, a gradual sector-coverage way of carbon pricing contributes to further mitigating the accumulated GDP loss, easing sectoral profit losses, and improving positive effects on energy indicators.

Economic impacts of meeting China's NDC through carbon taxes with alternative schemes for recycling tax revenues

This study examines the impact of meeting China's Paris Climate Agreement commitment to reduce its emission intensity by 65 % below 2005 levels by 2030 through various policy instruments. We use a dynamic recursive computable general equilibrium model to simulate the economy-wide impacts of administrative mandates and carbon taxes using different revenue recycling schemes. China's GDP in 2030 would be approximately 1 % lower than the baseline if carbon emissions were constrained by mandates. The commitment's economic costs are lower than the carbon constraint case, regardless of revenue recycling. Economic costs are the lowest when carbon tax revenue is recycled to reduce taxes on capital or corporate income. Subsidizing solar and wind energy further reduces emissions, but at a higher economic cost with a GDP loss of about 0.53 %–0.58 % from the baseline. The results highlight the importance of proper design architecture to make carbon taxes more palatable to policymakers and taxpayers.

Forecasting changes in the balance of the country's energy supply system under the introduction of a Carbon Border Adjustment Mechanism

Subject. The article investigates the Carbon Border Adjustment Mechanism (CBAM) and implications of its implementation for the energy systems of countries with high carbon footprint. Objectives. The aim is to create a forecast of changes in the balance of the country's energy supply system, considering the gradual introduction of the CBAM with a decrease in the number of free permits for non-payment of declared emissions, and an increase in the coverage of emissions. Methods. The study employs methods of statistical analysis. Results. The study established that the introduction of the CBAM creates economic threats for exporting countries with a high carbon footprint. A national emissions trading system is a means of combating it. The paper shows that with the forecast price of carbon permits obtained on the basis of time series extrapolation, the introduction of a system of emission quotas will reduce losses in GDP and the total energy capacity of the country's energy system. Conclusions. The establishment of the system of emission quotas is a complex and lengthy process that requires the development and testing of economic and financial mechanisms.

Tourism-related economic loss and damage from the North Island weather events on New Zealand conservation land and waters

Extreme weather events are causing increasing levels of loss and damage, including to natural assets and associated nature-based tourism economies. This article provides estimates of the economic impacts on public conservation lands and waters in New Zealand's North Island from the flooding events of Cyclone Hale and Cyclone Gabrielle in early 2023. Losses and damage are estimated in four buckets: regional tourism GDP losses from cancelled visitor bookings at Department of Conservation accommodation facilities; lost business revenue of companies operating in protected areas; lost value of government-managed visitor assets; and regional tourism GDP losses from estimated reductions in visitor numbers at three iconic protected area sites. The research also attributes a proportion of these losses to climate change, assisting learning and future planning for New Zealand's conservation agency.

Estimating the size of GDP loss in Southeast Asia due to the COVID-19 pandemic

ABSTRACT This Research Note explores how the major Southeast Asian countries were hit with negative growth rates due to the pandemic in 2020. National income was markedly reduced to a lower level and, even with present growth rates back at pre-pandemic levels, there will be permanent effects. The level trajectory for GDP will necessarily be lower compared to a non-COVID scenario with positive economic growth. Exponential smoothing is applied to GDP data for 2000–2019 with the purpose of estimating incomes for a non-COVID case and the deviation from the actual GDP in order to measure the loss of incomes. For the pandemic years, the negative impacts are most severe for countries with relatively large service sectors (Malaysia, Thailand) and less so for countries with a diversified economy or a large agricultural sector (Vietnam, Laos).

Warming the MATRIX: Uncertainty and heterogeneity in climate change impacts and policy targets in the Euro Area

This paper explores the potential impacts of climate change and mitigation policies in the Euro Area, considering the uncertainty and heterogeneity in both climate and economic systems. Using the MATRIX model, a multi-sector and multi-agent macroeconomic model, we simulate various climate scenarios by employing different carbon cycle models, damage functions, and marginal abatement curves found in the literature. We find that heterogeneous climate damages amplify both the magnitude and the volatility of GDP losses associated with global warming. By the end of the century, we estimate that assuming homogeneous shocks may underestimate the effects of climate change on aggregate output by up to one-third. Moreover, we find that the speed and feasibility of a low-carbon transition crucially depend on (i) the ambition in emission reduction targets set by the policymaker, which determine the level of a carbon tax, and (ii) the rate of technological progress, which influences the shape of the abatement cost curve.

Potential climate-induced impacts on trade: the case of agricultural commodities and maritime chokepoints

This study assesses the potential macro-economic effects of climate change affecting operations in three maritime chokepoints, i.e., the Panama Canal, the Suez Canal, and the Turkish Straits. The analysis focuses on agricultural commodities. It couples a “logistics” model of maritime trade flows with a Computable General Equilibrium model considering three modelling alternatives: (1) increase of “iceberg trade costs”, (2) shadow import tariffs, and (3) shadow export tariffs. Methodologically, we found a comforting qualitative agreement across methodologies in predicting the direction of changes in the main economic variables under scrutiny. However, negative GDP performances are more frequent and larger using the first method that also tends to predict lower import contractions than the other two methods. The impact assessment, examining storylines of climate-change-induced events delaying chokepoints operations, highlights that climate change impacts on chokepoints’ operations can convey detectable effects on production and prices of agricultural commodities associated with negative GDP impacts worldwide. In addition, although trade re-composition generates winners and losers, total losses tend to prevail. The combined GDP losses of the three chokepoints can reach $34 billion (2014 prices) in 2030. It shows that weather events in remote locations, such as the Panama Canal, can have cascading effects on the EU, with potential losses of USD 2 billion $ in GDP. North Africa, Middle East and Sub-Saharan Africa are particularly vulnerable. They suffer from a drop in imports of agricultural commodities and GDP losses in all the three cases. This impact assessment emphasizes another mechanism at play that could increase the asymmetry and the adverse distributional impacts of climate change on agriculture.

Macroeconomic impacts and co-benefits of deep-decarbonization in Thailand

The updated Nationally Determined Contributions (NDC) in 2022 of Thailand includes an aggressive GHG emission reduction target of 40% in 2030 from its baseline emissions. However, the macroeconomic impacts and co-benefits associated with reducing GHG emissions are not addressed. This study analyzes the macroeconomic implications and co-benefits of GHG emission reduction in Thailand to achieve the NDC and net zero emission (NZE) targets by 2050 using the AIM/Hub-Thailand model. This paper provides co-benefits for Thailand on ambitious long-term GHG emission reduction targets. Considering the co-benefit analysis in the policy documents will provide holistic insights on the positive impacts of GHG mitigation. Results show that Thailand would have to bear a GDP loss of 7.7% in 2050 compared to the BAU level if the net zero emissions need to be achieved. Fuel switching from fossil fuel to electricity in the demand side and improvement of technologies in the power sector also reduces air pollutant emissions. The increasing dependence on domestic energy supply in the NZE scenario will make the country less vulnerable to the fluctuating prices in the international energy market. In terms of trade-offs, the land use for sustainable biomass in both the NDC and NZE scenarios will be larger than in the BAU scenario. Results show better land use for biomass production and higher yields in agricultural production. Moreover, the achievement of NZE pathway will require effective usage of land area and better use of energy resources, thereby making the country more energy secure.

Impacts of emission trading scheme in Vietnam: A perspective of revenue redistributions

AbstractWith ambitious emission reduction targets presented in the international commitments, Vietnam has a pathway to implement an emission trading scheme (ETS) to curb its carbon emissions. However, research on the impacts of ETS in Vietnam is still unclear, especially since there is no study on ETS revenue redistribution policies. By developing a computable general equilibrium (CGE) model, this paper simulates the potential impacts of the ETS with different revenue redistribution options. The results indicate that to achieve Vietnam's target of 15.8% carbon emission reduction, the carbon price would significantly affect the economy with a GDP drop of 3.7% and a welfare loss of 2.89% of GDP. The revenue redistribution policies would lighten these negative impacts. While transferring to government activities reduces GDP loss, reducing income tax policy results in welfare improvement. At the sectoral level, the electricity sector is most negatively affected and also plays a key role in reducing carbon emissions in Vietnam. The revenue redistribution for government activities could improve outputs for the construction and some heavy industries while the revenue redistribution policy for households creates improvements for light industries and the electricity industry.

Modelling the socio-economic impacts of coal-fired electricity phaseout under carbon neutrality target: A dynamic CGE-based study of China

Given its significant carbon emissions, the phaseout of coal-fired electricity emerges as a crucial strategy in achieving the goal of carbon neutrality, which will fundamentally reshape China's social-economic landscape. In this study, a dynamic computable general equilibrium (CGE) model was constructed to evaluate the economic and social ramifications of phasing out coal-fired electricity, encompassing diverse pathway scenarios. The results suggest that the phaseout of coal-fired electricity will significantly influence the socio-economic system compared to the Business as Usual (BAU) scenario. Different phaseout scenarios are projected to yield a cumulative decrease in carbon dioxide emissions ranging from 36.38 to 60.15 Gt between 2020 and 2060. Consequently, there will be a cumulative GDP ranging from 22.22 to 36.29 trillion yuan, accompanied by a cumulative decline in employment affecting 23.68 to 29.92 million individuals. The anticipated trends in annual GDP and job losses are expected to exhibit a U-shaped curve, initially increasing, and then decreasing from 2020 to 2060 compared to the BAU scenario. A distinct trade-off is anticipated to arise between the potential for carbon reduction and the resultant losses in jobs and economic output. The more optimistic scenario, characterized by a lower peak value, an earlier peak time, and a later phaseout time, is projected to result in a relatively lower socioeconomic impact per unit of CO2 emissions reduction. These findings provide policymakers with vital insights, informing the development of strategies for a gradual transition away from coal-fired electricity while minimizing socio-economic repercussions.

Russo–Ukrainian war: Limits of Western economic sanctions

AbstractThe potency of economic sanctions imposed on nations depends on demand and supply adjustment possibilities. Adverse GDP impacts will be maximal when import, export, production, distribution and finance are inflexible (universal non-substitution). This paper elaborates these conditions, and quantifies the maximum GDP loss that Western sanctions could have inflicted on Russia in 2022–2023. It reports the World Bank's predictions, contrasts them with results and draws inferences about the efficiency of Russia's workably competitive markets. The paper shows that Russia's economic system exhibits moderate universal substitutability and is less vulnerable to punitive discipline than Western policymakers suppose. The likelihood that the Kremlin will restore Ukraine's territorial integrity, ceteris paribus, is correspondingly low. The authors also observe that unintended adverse side effects from sanctions and counter-sanctions were excessive because policymakers chose to maximize GDP-damage to Russia instead of optimizing Western and third-party net benefits. Given moderate substitutability, Western policymakers can switch to smart net benefit maximizing sanctions that enhance Western and third-party welfare without significantly bolstering Russia's military industrial productivity and war-waging capabilities by retaining embargoes on weapons, technology and critical components, while selectively softening other restrictions. Smart sanctions might facilitate a negotiated settlement of the Russo–Ukrainian war.