Name: Q-CRAFT (Quantitative Climate Change Risk Assessment Fiscal Tool)
Type: Spreadsheet model
Institution: IMF
Documentation: Q-CRAFT Tool and User Guide, via the IMF Fiscal Risk Toolkit
Geographic coverage: Single country (global)
Description: Q-CRAFT is an Excel-based tool to help governments assess the long-term, macroeconomic fiscal risks from climate change. Using country-specific empirical data on the macroeconomic impacts of climate change, a production function, and the IMF’s public debt dynamic equation, it analyses how macroeconomic and fiscal variables may evolve under different IPCC emission scenarios and speeds of economic adaptation to temperature changes through to 2100. The impact of temperature on GDP is country-specific and quantified via the method outlined in Kahn et al. (2021), which links temperature to labor productivity and thereby to GDP growth. The tool is available for 170 countries, and country-specific risks can be included.
Questions to be answered/variables considered: Q-CRAFT offers long-term baseline estimates (up to 2100) for key macroeconomic variables such as GDP, fiscal deficit, and the debt-to-GDP ratio. This can help MoFs understand potential long-term economic impacts and identify slow-building climate change fiscal risks not immediately visible in the budget cycle or medium-term fiscal framework. In turn, this can assist budget preparation, debt management, and long-term fiscal (sustainability) analysis.
Strengths:
- The tool is transparent and Excel-based.
- It is adaptable to national circumstances and capacities. It comes preloaded with public data but can be updated with national data. Assumptions for productivity growth, inflation, interest rates, and demographic growth can be customized.
- As the dataset leveraged by Q-CRAFT includes data from various emission scenarios and incorporates information from 30 different climate models, Q-CRAFT’s analysis accounts for both uncertainty in future emissions (scenario uncertainty) and uncertainty in the climate system’s response to emissions (model uncertainty).
Limitations:
- The results do not explicitly account for tipping points, sea-level rise, nonmarket damages (e.g., mortality, conflicts, and food insecurity), or other environmental risks, unless the user manually adds them.
- Q-CRAFT results are limited to aggregate country analysis and do not provide information on specific sectors.
Use: The Q-CRAFT Tool and its User Guide are publicly available via the IMF Fiscal Risk Toolkit. As it has no scripts or macros, it can be used with any version of Excel. The IMF Fiscal Affairs Department provides capacity development for the implementation of Q-CRAFT, and support can extend to strengthening a country’s overall macrofiscal forecasting in the context of climate change, which also fosters cross-government collaboration and the establishment of working groups. Countries that have used the tool include Armenia, Azerbaijan, Georgia, Jamaica, Kenya, Morocco, Rwanda, the Seychelles, the Netherlands, and Uganda.
Development/lessons/challenges: Using Q-CRAFT and thereby conducting quantitative long-term fiscal analysis under various climate change scenarios is a new type of analysis for many MoFs. Future work includes incorporating other empirical datasets in Q-CRAFT as they become available, including the risk of sea-level rise under different climate change scenarios or the impacts of long-term trends such as climate change-induced weather volatility.