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Findings from the World Bank Group’s Country Climate and Development Reports on the macroeconomic impacts of resilient and low-emissions development scenarios

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Institution
World Bank
Author(s)
Camilla Knudsen (Economist), David Groves (Lead Climate Change Specialist), Stéphane Hallegatte (Chief Climate Economist)
Published
Topic Area
The economic and fiscal impacts the green transition
Question
What are the macroeconomic impacts of the transition and how can they be managed?
Citation

 World Bank (2025) Findings from the World Bank Group’s Country Climate and Development Reports on the macroeconomic impacts of resilient and low-emissions development scenarios, Contribution to ‘Compendium of Practice from a Global Community of Ministries of Finance and Leading Organizations’, Coalition of Finance Ministers for Climate Action

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Modeling in nearly 50 countries shows that low-emissions development pathways can, in most cases, be implemented without compromising economic growth

However, these scenarios are not necessarily consistent with a global temperature goal or a global net zero target, and the low costs of (or the benefits from) the transition depend on a range of external and internal factors, such as mitigation elsewhere, technological development, the domestic policy environment, and access to financing.

Key Messages

  • Country Climate and Development Reports (CCDRs) aim to help countries prioritize the most impactful actions to simultaneously boost resilience and adaptation to climate change, reduce greenhouse gas emissions, and deliver on broader development objectives. They are especially useful for MoFs through their provision of sectoral deep-dives and macroeconomic and financial assessments. The World Bank models used for the analysis can be made available to MoFs upon request.
  • The reports are hosted by the World Bank yet are country-specific in that they are consistent with and reflect national climate targets. They explore plausible pathways to these ends but refrain from putting forward supposedly optimal decarbonization pathways. The transition pathways also vary, depending, for example, on the country-specific potential for renewable energy or the political environment.

Empirical results:

  • Economic growth across 50 low- and middle-income countries can be similar or faster in low-emissions scenarios, conditional on favorable circumstances such as well-designed policies, active private sector involvement, reallocation of resources (including capital and labor), and complementary measures to navigate political economy challenges.
  • The impact of climate-related investments on short-term economic growth depends on the return on investments and on how investments are financed (i.e., whether they crowd in or crowd out other investments). Especially in upper-middle-income countries, CCDR low-emissions scenarios tend to combine growth-enhancing reforms and investments with short-term costs and long-term benefits.
  • Low-emission development scenarios almost always require larger investments and lower operational costs and thus have a greater short-term impact on household consumption than on GDP. This emphasizes the importance of interventions to facilitate a just transition.
  • The CCDRs show that targeted adaptation action can reduce the impacts of climate change significantly and have high economic returns. Nonetheless, adaptation cannot fully offset climate change impacts.
  • Some CCDRs adopt a triple dividend approach that includes avoided losses from climate change, economic benefits independent of avoided impacts, and wider environmental and social benefits. The latter two are often far greater than the first.
Keywords
adaptationinvestment needslocalmodelstransition