A new ACCREU project deliverable, “Impacts of Extremes, Catastrophic Events, and Supply Chains“, offers a comprehensive assessment of how climate-related extremes affect Europe’s economy. The findings indicate that climate extremes increasingly pose economic risk, underscoring the urgency of robust adaptation and risk-management strategies. They provide essential evidence for policymakers across Europe as they prepare for a future with more frequent and more complex climate extremes.
Flood risks: from local businesses to long-term economic growth
Three chapters focus on flood impacts at different scales. Research from Vrije Universiteit Amsterdam shows large regional variations in expected annual flood damage to the Dutch commercial sector and reveals a widening insurance coverage gap through 2050 and 2080. The analysis highlights the need to align flood risk reduction strategies with a well-functioning insurance system to ensure long-term resilience across all sectors of the Dutch economy.
Deltares complements this picture by examining extreme and catastrophic floods and their consequences for financial stability. While even extreme events may not immediately destabilize the Dutch financial system, the study warns that it examines only one of the several transmission channels through which floods affect the economy and financial stability — and that, due to uncertainties, real risks may be considerably higher.
At the European scale, the Potsdam Institute for Climate Impact Research demonstrates that floods reduce regional economic growth for at least a decade. Using climate-econometric methods, the team projects increasing flood damages across Europe under future warming, especially in Central Europe and the Alpine region. The study highlights the importance of subnational-level analyses and reveals considerable adaptation needs.
Supply Chain Spillovers Intensify the Economic Impact of Local Water Scarcity
By combining global supply chain and high-resolution water availability data, scientists from the University of Graz show that supply chain spillovers significantly amplify regional GVA losses. In a counterfactual analysis, the study reveals that only a third of total losses are captured when supply chain spillovers are not accounted for. This highlights the importance of incorporating supply chain spillover effects into climate impact assessments and the urgent need for adaptation measures aimed at strengthening supply chain resilience under future climate change.
Growing threat of compound wildfires in Southern Europe
The Technical University of Denmark investigates the impacts of wildfires in Southern Europe. Using a combination of machine learning and regional climate modeling, the team identifies soil moisture, precipitation, humidity, vegetation type, slope, and population density as the most influential drivers of compound wildfire risk. Projections show a significant increase in wildfire risk under high-warming scenarios, with land use change — including afforestation — further exacerbating this risk. These results highlight the need for improved wildfire risk management and climate change adaptation approaches to cope effectively with wildfire risks in a changing climate.
Figure 1. Macroeconomic effects of water scarcity. a. Cumulative losses in real gross value added in Europe caused by water scarcity shocks during 2000-2019, accounting for supply chain spillovers (black line) and purely local exposure (gray line). b. Observed trajectory of Europe’s total real gross value added (dotted black line) versus counterfactual trajectory without water scarcity shocks accounting for supply chain spillovers (blue line). c, d. Gross value added change per country in 2019 caused by local (c) and supply chain-transmitted (d) water availability shocks during 2000-2019. All monetary values shown are in constant 2015 Euros. Source of figure: Marbler (2025).
References
ACCREU Deliverable 2.5: Impacts of Extremes, Catastrophic Events, and Supply Chains
by Christian Otto, Michiel W. Ingels, Max Tesselaar, Jan Brusselaers, Kees van Ginkel, Jan Hassel, Birgit Bednar-Friedl, Alexander Marbler, Martin Drews, Jorge Soto Martin, Ophélie Meuriot
[Figure] Marbler, A. (2025). When Supply Chains Run Dry: Spillovers Intensify the Economic Impact of Water Scarcity. Available at SSRN 5354158. https://dx.doi.org/10.2139/ssrn.5354158 [Received the Young Economists Award 2025 by the Austrian Economic Association (NOeG); Presented at: 40th Annual Conference of the European Economic Association (EEA 2025), Bordeaux, France; 30th Annual Conference of the European Association of Environmental and Resource Economists (EAERE 2025), Bergen, Norway; Annual Conference of the Austrian Economic Association (NOeG 2025), Krems an der Donau, Austria.]