The economic impact of climate risks in China: evidence from 47-sector panel data, 2000-2014

Climate risks have significant economic impacts on the various sectors of an economy through direct and indirect channels. When aggregated, their impact can be underestimated or overestimated. This paper examines the impact of five types of climate risks on 47 sectors in China from 2000 to 2014 through the application of a threshold model. We find that: (1) the impact of the integrated climate risks index on sector output is linear. While rainstorms show a U-shaped relationship with output, the other four types of risks-droughts, typhoons, high temperatures and low temperatures freezing-have an inverted U-shaped relationship. (2) Climate risks indirectly influence sector output through capital stock in a significantly positive way. (3) The proportion of intermediate inputs leads to significant differences in the impact of climate risks on sectors. The results suggest that climate policies need to be sector-and risk-specific, as well as dynamic.