Climate Economics Report: A Year of Escalating Costs – Allianz Research

Key Takeaways

• 1.Allianz Research introduces two proprietary climate screening scores via ClimRad: the Climate Change Score (CCS), which measures anomaly deviations against a 1950–1970 baseline, and the Climate Stress Score (CSS), which measures physical severity against fixed thresholds.
• 2.The ClimRad economic damage regression models subnational real GDP per capita growth and demonstrates that humid heat (wet-bulb temperature) and day-to-day temperature variability have statistically significant negative effects, with heat damage saturating at -1.99 percentage points.
• 3.The projected 2027 El Niño cycle will exert substantial drags on economic growth and fuel inflation, with China (-$147.2bn; -0.4 pp) and the US (-$91.5bn; -0.34 pp) facing the largest dollar-value GDP losses.

Table of Contents

• A1 – Climate Change Score: measuring change relative to a historical baseline
• Interpretation
• Drought component: SPEI-03 and directional consistency
• Relationship with the precipitation component
• A2 – Climate Stress Score: measuring severity relative to physical thresholds
• Joint interpretation and methodological boundaries
• A3 – Country-level extreme weather events in 2025
• A4 – Calibration of the 2026 European heat episode
• A4.1 Data
• A4.2 Wet-bulb temperature
• A4.3 Order of aggregation
• A5 – ClimRad damage function
• A5.1 Specification
• A5.2 Regression specification
• A5.3 Properties and limits of the heat channel
• A6 – The 2027 economic outlook – El Niño effect

Report data

Table A6.1: Estimated GDP and inflation effects of El Niño in 2027