What climate change costs the economy, why potential damage could turn out to be significantly higher than previous estimates, and how China is turning the climate transition into a source of new growth — these were the questions discussed by NES experts at a panel in Moscow. BRICS Business Magazine has compiled the key takeaways from the meeting along with recommendations on which measures can reduce climate risks for the Russian economy
Translated with AI assistance
Russia could lose up to 2% of its GDP annually due to climate change if it fails to adapt its economy to the new conditions in a timely manner. This estimate was presented by Alexander Chernokulsky, Deputy Director of the A. M. Obukhov Institute of Atmospheric Physics of the Russian Academy of Sciences, at a discussion held by the New Economic School titled «Climate and Economy: The Cost of Warming vs. The Cost of Inaction.» According to him, with active adaptation measures, the damage could be significantly lower.
The discussion also featured Anton Suvorov, Rector and Professor at the New Economic School (NES), and Galina Hale, Professor at the University of California, Santa Cruz. The experts discussed how climate change is already reshaping the economy, why previous damage estimates may have been understated, and which tools can help integrate climate risks into standard business calculations.
At first glance, Russia is in a more advantageous position than many countries: most of its territory lies in northern latitudes, and warming could theoretically make some regions more suitable for agriculture. But, as Anton Suvorov noted, climate change simultaneously increases uncertainty: floods, fires, and other extreme events are occurring more frequently, and the specialization of regions is beginning to shift. Northern territories may gain new opportunities, while traditional agricultural areas, on the contrary, will face droughts and moisture deficits.
Chernokulsky specifically highlighted the risks facing Russia. The main one is the thawing of permafrost, upon which a significant part of the northern infrastructure is built. In addition, in the south of European Russia and in the Black Earth region, summer periods are becoming drier and longer precisely where the most important agricultural regions are concentrated. At the same time, the very nature of precipitation is changing: the likelihood of heavy downpours and the associated floods is increasing. Another risk is forest fires, which are becoming more frequent and larger in scale.
That said, warming may also bring local benefits, although taking advantage of them is more difficult than it seems. The climate in the north could become more suitable for farming faster than the region’s soil and infrastructure are ready for agricultural development. «We haven’t really learned how to adapt to the positive aspects yet,» Chernokulsky noted.
For Russia, there is yet another indirect channel of risk: the state of the global economy. The country remains a major exporter of oil and gas, so a global slowdown, shifts in energy demand, and the transformation of world markets will be transmitted to the Russian economy regardless of how severely climate change directly affects its territory.
The economic cost of climate change may be significantly higher than previous estimates. According to Galina Hale, until recently the damage from one additional ton of carbon dioxide was often estimated at approximately $100. More recent studies that account for indirect consequences yield estimates on the order of $1000–2000 per ton.
The difference arises because direct damage—heat, drought, crop loss, or flooding—is only the first link in the economic chain. Modern production is interconnected through global supply chains, and a disruption in one region can quickly spread to other industries and countries.
As an example, Hale cited the Fukushima disaster: the shutdown of facilities in the affected region disrupted the production of components needed by the automotive industry in other countries. The same mechanism applies to climate risks – a local event can trigger a global impact on production.
There is also less obvious damage. After a fire, flood, or hurricane, capital has to be directed toward rebuilding homes, businesses, and roads—that is, not toward new investments and growth, but toward returning the economy to its previous state. Climate risks simultaneously increase insurance costs and reduce property values in hazardous areas.
Therefore, the question «how much does climate policy cost» has a flip side: inaction also entails costs, and some of them arise only after the available options have been drastically reduced.
It is impossible to completely avoid the consequences of the warming that is already taking place. Therefore, alongside reducing emissions, economies must invest in adaptation — infrastructure, agriculture, urban planning, insurance, and protection against extreme weather.
But adaptation capabilities are not distributed equally. Galina Hale has pointed out that people with different income levels may understand climate risk equally well, yet respond to it in completely different ways. A wealthier family can relocate, rebuild their home, purchase insurance, or invest in property protection. Low-income individuals often lack such options. As a result, even an identical climate shock widens wealth inequality over time.
A similar problem arises at the country level. The most vulnerable economies often have fewer resources for adaptation, even though they have historically contributed far less to cumulative emissions. That is why international climate finance increasingly addresses not only emission reductions, but also water, healthcare, urban protection, and agriculture.
At the same time, the climate transformation is creating new markets. China was discussed at the conference as an example demonstrating that green technologies can become an independent growth industry. Today, the PRC is one of the world leaders in the production of solar panels, batteries, and electric vehicles (read about how China became No. 1 in the electric vehicle market in a special review by BRICS Business Magazine). According to the cited estimate, the clean energy sector accounted for about 11% of the Chinese economy in 2025. Moreover, the growth in green technology production is accompanied by a slowdown in the growth of coal consumption.
In this process, China is interesting precisely as an industrial case. The state and private investment machine has helped turn climate policy into large-scale production chains – from panels and batteries to electric vehicles. As a result, spending on the energy transition simultaneously creates export industries, employment, and technological specialization.
Ultimately, the climate economy faces the same contradiction as pension systems, healthcare, or infrastructure: the costs must be borne now, while a significant part of the results will only materialize decades later.
Anton Suvorov compared this with other long-term solutions: people find it hard to give up consumption today for the sake of health, education, or a future pension. A similar logic applies at the state level – costly measures are difficult to implement if their benefits seem distant and abstract.
Chernokulsky formulated the problem even more concisely: climate processes are measured in decades and by the end of the century, whereas people and politicians make decisions on a much shorter time horizon. «The main point is the insufficient understanding of the price of the future, the cost of future changes,» he noted.
In other words, for governments and businesses the question is no longer whether climate policy has a price. Both scenarios — action and inaction — come at a cost. The challenge is to determine which one will prove higher.
