Hotter planet, hotter factories: Uneven impacts of climate change on productivity

This study documents the impacts of climate change on firm-level productivity by matching a globally comparable and standardized survey of nonagricultural firms covering 154 countries with climate data. Understanding the mechanisms through which climate change affects economies and estimating its impacts in various sectors are essential to implement mitigation and adaptation policies and actions at national and global scales.

The findings show that the overall effects of rising temperatures on productivity are negative but nonlinear and uneven across climate zones. Firms in hotter zones experience steeper losses with increases in temperature. A 1 degree Celsius increase from the typical wet-bulb temperature levels in the hottest climate zone (25.7 degrees Celsius and above) results in a productivity decline of about 20.8 percent compared to firms in the coldest climate zone.