Overview

Understanding the intricate relationship between climate dynamics and the macroeconomy is crucial for informed policy and long-term planning. However, there is a gap between climate modeling and the understanding of its full macroeconomic effects, partly due to challenges such as nonlinear climate dynamics, feedback loops, and model complexity. To address this, the National Academies of Sciences, Engineering, and Medicine (the National Academies), under the auspices of the Roundtable on Macroeconomics and Climate-Related Risks and Opportunities, convened a workshop on November 1–2, 2023, to consider the state of knowledge on cascading, compounding, and nonlinear physical climate risks and their implications for the macroeconomy. Through panels of invited speakers and interactive breakout discussions, the workshop focused on physical climate risks and explored how different disciplines assess and model impacts. Workshop discussions explored current and historical examples of shocks¹ to the macroeconomy and how those have been modeled, and experts shared some of the lessons they have learned that may be relevant to policy makers today.

Several common threads arose as issues of broad interest in the discussions:

1. Integration of Complex Factors into Models. Many invited experts and participants highlighted the importance of integrating complex climate and socioeconomic factors into models to understand their impacts on labor, gross domestic product, vulnerability, and

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¹ A shock is an unexpected or sudden event with large-scale, unexpected impacts.

1. resilience. Moreover, many underscored the multifaceted nature of climate change risks, emphasizing the benefit of considering interactions between hazard, vulnerability, exposure, and societal responses, particularly for vulnerable populations.
2. Interdisciplinary Research and Collaboration. Many experts and participants stressed the necessity of interdisciplinary collaboration and holistic approaches to model and assess systemic risks effectively, recognizing the challenges, such as academic silos and funding constraints. Experts and participants discussed opportunities for integrating diverse data sources, modeling tools, and disciplinary perspectives to understand complex systems’ interactions and dynamics.
3. Proactive and Dynamic Responses to Shocks. Many experts recognized the lasting effects of macroeconomic and environmental shocks on economies and societies, citing past and contemporary examples, and noted the importance of proactive and dynamic responses when shocks occur. Many highlighted the complexity and uncertainty inherent in understanding and addressing shocks in the context of climate change; considering this, several experts emphasized the benefit of transformative actions, resilience-building, and adaptive strategies to navigate uncertain futures.
4. Innovative Modeling Approaches. Several participants emphasized innovative approaches to avoid oversimplifying models and incorporate the latest microlevel insights into macrolevel models. Discussions focused on data availability and quality for model accuracy and predictive capabilities. Some participants highlighted the challenge in modeling at different scales and emphasized the benefit of enhanced data access, quality, and standardized processes for upscaling. Moreover, participants discussed the importance of clearly defining the goals and purpose of modeling exercises with relevant experts before selecting specific models. Some emphasized using qualitative information alongside quantitative data in modeling efforts.
5. Effective Communication and Open Data. Several participants discussed the importance of clear communication of model limitations and findings, along with open data and open-source modeling, for informed policy and decision making. Moreover, a few experts highlighted the necessity of effective communication and collaboration for successful interdisciplinary research. Several stressed the importance of building trust, establishing common ground, and engaging with diverse stakeholders to ensure the relevance and impact of research outcomes.

Overall, the discussions explored the interconnected nature of natural and human systems and the risks that propagate through them. The crosscutting themes highlighted the benefit of integrated, interdisciplinary approaches, potentially presenting opportunities for collaboration, improved data quality, effective communication, and informed decision making.

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