Dominica, Grenada, Saint Lucia, and Saint Vincent and the Grenadines - Macro Modeling Annex - Modeling the impact of Climate Change on Growth and Poverty

Jul 19, 2026

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Macro-structural modeling supports climate change policy analysis for four IDA OECS countries using the country-specific MFMod-CC framework. The model links climate hazards to damages, adaptation actions, and key macroeconomic aggregates through baseline growth projections to 2050 and scenario-based shocks under Historical, SSP2-RCP4.5, SSP5-RCP8.5, and heat/agriculture futures. It quantifies impacts via selected channels (infrastructure, human capital, agriculture, and tourism), updates a modified production function, and uses stochastic simulations for hurricanes and floods with results summarized by percentile outcomes.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages8

Reading Time20 min

AccessFree to download

Macro Modeling Annex

Modeling the impact of Climate Change on Growth and Poverty

Baseline growth scenario to 2050

Climate change scenario shocks to 2050

Adaptation measures and financing options

Impact channels and inputs to MFMod-CC

Modified production function and damage sources

Stochastic shocks for hurricanes and floods

Extreme and alternative reconstruction scenarios

Pub lic Disclosure Authorized Pub lic Disclosure Authorized Pub lic Disclosure Authorized Pub lic Disclosure Authorized Dominica, Grenada, Saint Lucia, and Saint Vincent and the Grenadines Macro Modeling Annex MACRO MODELING ANNEX Modeling the impact of Climate Change on Growth and Poverty Macro-structural modeling was done for each of the four IDA OECS countries using a country-specific Climate Change Macro-Fiscal Model (MFMod-CC) .1 The MFMod-CC is the extended version of the MFMod– the World Bank’s macro-structural model already used to do core macro-modeling for each of the OECS countries. MFMod-CC was used to model the linkages between damages caused by climate change, climate adaptation, and macroeconomic aggregates. A MFMod-CC has been developed for each of the OECS countries to: • Create a “baseline” growth scenario up to 2050 for each country. The baselines assume no additional climate change impacts beyond what has already been experienced up to 2022 and are used for comparison with the outcomes from climate change-related shocks and policies. • Model the impact of climate change-related shocks on the economy under different climate future scenarios (Historical, SSP2-RCP4.5, and SSP5-RCP8.5 for flooding and hurricanes; and Optimistic and Pessimistic for heat and agriculture) up to 2050. • Model selected adaptation measures in terms of reduced damages, investment costs and cobenefits, and the impact on macroeconomic aggregates. • Model alternative financing options for climate adaptation investments, including deficit financing, increasing taxes, or reallocating expenditures. Modeling to produce country-specific estimates of economic damages from climate change as inputs into the MFMod-CC The impact channels modeling used country-specific climate scenarios and biophysical effects to estimate economic damages. A set of four impact channels was selected based on relevance to the countries and modeling feasibility. The modeling involved four stages: (i) selecting climate scenarios; (ii) collecting additional data required for the analyses; (iii) selecting and adapting a set of biophysical models for each of the four impact channels to the conditions of the four OECS countries; and (iv) applying the three selected climate scenarios to the biophysical models for each impact channel2 to produce the set of shocks for the projection period 2024 to 2050 as inputs into the MFMod-CC for each country. Climate Change Impact channels | Climate change impact channel | Inputs to MFMod-CC | | --- | --- | | Infrastructure (affected by hurricanes and floods) | Direct reductions through damage to the capital stock (infrastructure) and temporary productivity loss. | 1 For a detailed technical description of the model see Burns et al (2019) and Burns et al (2021) . 2 Impacts through the infrastructure channel are modeled separately for hurricanes and floods, while the tourism channel is indirectly modeled. | Human capital (labor productivity affected by heat) | Direct and indirect losses in terms of hours worked and productivity across sectors from impact of higher temperatures on labor productivity. | | --- | --- | | Agriculture (crop yields) | Direct reductions in aggregate value added of agriculture andagroindustry productivity through reduced crop yields due to changes in rainfall patterns and extreme heat. | | Tourism* | Indirect losses through domestic price increases (due to a reduction in potential output from damage to capital stock) . When domestic price increases and the rest of world's prices stay the same, tourism demand falls. | The standard production function in MFMod-CC is modified to account for damages from climate change , including (1) reductions in aggregate TFP due to lower agricultural productivity (crop yields); (2) reduction in labor productivity and supply due to higher temperatures; (3) the impacts of flooding and hurricanes on capital stock. Furthermore, export demand is endoge

FAQs

What is the MFMod-CC used for in this annex?

MFMod-CC models linkages between climate-change damages, climate adaptation, and macroeconomic aggregates for each of the four OECS countries.

How are the baseline and climate future scenarios defined up to 2050?

Baselines project growth to 2050 assuming no additional climate impacts beyond those experienced up to 2022. Climate scenarios then introduce shocks through Historical, SSP2-RCP4.5, SSP5-RCP8.5 for flooding and hurricanes, plus Optimistic and Pessimistic cases for heat and agriculture.

Which climate impact channels feed into MFMod-CC?

The selected channels are infrastructure (hurricanes and floods), human capital (heat affecting labor productivity), agriculture (crop yield changes), and tourism (indirect losses via domestic price effects).

How does the annex model hurricanes and floods given their uncertainty?

A stochastic shocks approach draws annual damage values from empirical distributions based on RCP4.5 and RCP8.5 scenario histories and futures, running each scenario 100 times and reporting results by percentile boundaries.

Jul 19, 2026

Upload by Eliana