Treating fiscal and climate risks as separate threats leads to dangerous underestimation, researchers warn

Climate change is a threat to countries’ macroeconomic and fiscal stability. Extreme weather events exacerbated by global warming alone are costing the world $143 billion every year. However, measures to mitigate and adapt to climate change can also pose a risk to fiscal stability, especially for emerging and low-income developing countries, whose limited public spending capacity also makes them more vulnerable to extreme events. But how are climate and fiscal risks related, and above all, how can they be mitigated?

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