France faces 7.4% GDP loss in NGFS climate scenarios
New short-term climate scenarios from the Network for Greening the Financial System (NGFS) indicate France could lose 7.4% of its GDP from severe weather events. The Banque de France highlights these findings, stressing the benefits of an orderly low-carbon transition and the risks of delay.
Vulnerability to dry events
The NGFS 'Disasters and Policy Stagnation' scenario reveals France's particular vulnerability to physical climate risks.
French GDP could fall by 7.4% in 2026 due to 'dry events' (heatwaves, droughts, wildfires), significantly more than the EU average of 4.8%.
This impact persists into 2027, with GDP remaining 3.4% lower (compared to 3.3% for the EU).
Sectors like agriculture, construction, and biofuels face the largest production losses, estimated at 17.2%, 21.8%, and 20.2% respectively.
These events, though rare, are not unprecedented and have a 2% annual probability on a continental scale.
The scenarios also project temporary inflation, posing a dilemma for the European Central Bank, which would initially cut rates to support recovery before gradually raising them to combat inflation and return to its 2% target.
Transition pathways and their costs
The NGFS scenarios model various transition risks, including an 'Orderly Transition' and a 'Sudden Wake-Up Call' for delayed action.
A 'Diverging Realities' scenario also explores global disparities.
While the macroeconomic impact on French GDP from climate mitigation policies is limited (up to 1.5% loss by 2029 in the 'Diverging Realities' scenario), sectoral effects are pronounced.
Carbon-intensive industries face higher financing costs, while clean energy sectors benefit.
Notably, a 'Sudden Wake-Up Call' could trigger a 3.1 percentage point rise in European inflation by 2027, potentially leading to a 100 basis point increase in key interest rates by 2028, hampering investment.
Foresight over reaction
The NGFS scenarios provide a crucial early warning for France, revealing its disproportionate vulnerability to physical climate events compared to its European peers.
While not a forecast, these findings underscore the urgent need for proactive adaptation and an orderly transition to avoid severe economic disruption.
The models' hypothetical central bank responses further emphasize the complex policy challenges ahead.