Extreme Weather in Europe: Determinants and Economic Impact

38 Pages Posted: 8 Jan 2025

See all articles by Marcelle Chauvet

Marcelle Chauvet

University of California Riverside; University of California Riverside

Claudio Morana

Università di Milano Bicocca; Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES); Center for Economic Research on Pensions and Welfare Policies (CeRP); Rimini Center for Economic Analysis - Europe ETS; Rimini Center for Economic Analysis - HQ

Murilo Silva

University of California Riverside

Date Written: January 07, 2025

Abstract

This paper investigates the linkage between deteriorating extreme weather conditions and anthropogenic GHG emissions and their economic impact on 40 European countries. The analysis employs the European Extreme Events Climate Index (E3CI) and its seven subcomponents, i.e., extreme maximum and minimum temperatures, wind speed, precipitation, droughts, wildfires, and hail. Using an innovative panel regression-based trend-cycle decomposition approach, we find support for the contribution of human-made GHG emissions to the deterioration of underlying extreme weather conditions and their highly nonlinear pattern. We then conduct a Growth-at-Risk analysis within a quantile panel regression framework to assess the economic implications of our findings. We show that deteriorating extreme weather conditions, as measured by the E3CI index, negatively impact the entire GDP growth rate distribution. Yet the impact on the downside risk to growth is much more substantial than the upside risk. This result holds for various E3CI components, such as rising extreme maximum temperature, wind speed, drought, and wildfires.

Keywords: climate change, extreme weather events, global warming, GHG emissions, trend-cycle decomposition, Growth-at-Risk, panel quantile regressions, Europe

JEL Classification: C21, C23, Q51, Q54

Suggested Citation

Chauvet, Marcelle and Morana, Claudio and Silva, Murilo, Extreme Weather in Europe: Determinants and Economic Impact (January 07, 2025). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 547, Available at SSRN: https://ssrn.com/abstract=5086307 or http://dx.doi.org/10.2139/ssrn.5086307

Marcelle Chauvet

University of California Riverside ( email )

Department of Economics
4136 Sproul Hall
Riverside, CA 92527
United States
(951) 827-1587 (Phone)

HOME PAGE: http://sites.google.com/site/marcellechauvet/

University of California Riverside ( email )

Department of Economics
Riverside, CA 92527
United States

HOME PAGE: http://sites.google.com/site/marcellechauvet/

Claudio Morana (Contact Author)

Università di Milano Bicocca ( email )

Dip Economia Metodi Quantitativi Strategie Impresa
Piazza dell'Ateneno Nuovo 1
Milano, 20126
Italy
+39 0264483091 (Phone)

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES) ( email )

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

Center for Economic Research on Pensions and Welfare Policies (CeRP) ( email )

Moncalieri, Turin
Italy

Rimini Center for Economic Analysis - Europe ETS ( email )

Piazza Ateneo Nuovo 1
Milan, 20126
Italy

Rimini Center for Economic Analysis - HQ ( email )

900 University Avenue
Riverside, CA 92521
United States

Murilo Silva

University of California Riverside ( email )

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