Budgetary Costs and Risks from Climate Policy Inaction and Climate Risks

Climate risks can cause considerable direct and indirect costs for public budgets. For Austria, a comprehensive overview of the potential costs and risks of climate policy inaction and climate risks for the public sector is still missing.

Against this background, WIFO Senior Economists Angela Köppl and Margit Schratzenstaller first provide a brief overview of the transmission mechanisms through which climate risks can affect public budgets. Subsequently, the existing empirical literature for Austria is reviewed to obtain as comprehensive a picture as possible of the budgetary costs or risks associated with climate policy inaction or climate risks. On this basis, ranges for the extent of corresponding budgetary costs or risks are indicated. Hereby we distinguish between budgetary costs that are already being incurred today and future budgetary risks.