## Online Annex 6. On Economic Losses from Slow-Onset Climate Events in Latin America and the Caribbean

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**Canonical URL:** [Online Annex 6. On Economic Losses from Slow-Onset Climate Events in Latin America and the Caribbean](https://www.imf.org/-/media/files/publications/reo/whd/2024/october/english/onlineannex6.pdf)

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### Observed climate trends in LAC
- Average temperature in LAC increased by about 0.4 degrees Celsius (°C) in the second half of the 20th century.
- Regional and subregional observed changes:
  - CAPDR countries: temperature rise ranges from +0.3°C to +0.7°C, with an area-weighted average of +0.6°C.
  - Caribbean: temperatures rose by +0.4°C, ranging between +0.3°C and +0.8°C across countries.
  - South America: average temperature rose by +0.4°C, with individual changes ranging from -0.1°C and +0.6°C.
- Documented impacts already observed in the region:
  - Altered precipitation patterns and intensified droughts, especially in CAPDR’s Dry Corridor and the tropical Andes.
  - Intensified storm surges and tropical cyclones in the Caribbean, CAPDR, and the eastern coast of Mexico.
  - Disruption of plankton communities and reduced coral abundance and density in the Caribbean Sea and the Gulf of Mexico.
  - Andean glaciers have lost over 30 percent of their area.
  - Increased incidence of dengue fever in Peru, Mexico, and Brazil.
  - Contribution to sea level rise.

### Projected temperature changes under scenarios
- Projections by 2050 (relative to the end of the last century):
  - ‘Paris’ scenario: temperatures projected to be 1.2°C higher.
  - “Moderate” scenario: temperatures could reach 1.5°C higher.
  - ‘Hot’ scenario: temperatures could reach 2.4°C higher.
- Scenario definitions (as used in the analysis):
  - ‘Paris’ = SSP1-2.6 (in line with the Paris goal to keep global mean temperature increase below 2 ºC with respect to pre-industrial times).
  - ‘Moderate’ = SSP2-4.5 (continuation of present trends).
  - ‘Hot’ = 90th percentile of the SSP3-7.0 ensemble (high-emission, fast-warming, pessimistic case; CO2 emissions approximately double by 2100).
- Temperature changes are based on 30-year running means to capture long-run climate normals. Regional temperature averages are weighted by country area. Due to data limitations, the Caribbean group only includes The Bahamas, Belize, Guyana, Haiti, and Jamaica.

### Estimated economic losses from long-term temperature shifts
- Methodology: Estimates use the empirical model of Mohaddes and Raissi (2024), linking income losses to temperature anomalies and distinguishing long-term shifts in temperature means from weather variability.
- Projected average per capita GDP losses in LAC from long-term temperature shifts:
  - By 2050:
    - ‘Paris’ scenario: 1 percent loss.
    - “Moderate” scenario (present trends): 1½ percent loss.
    - ‘Hot’ scenario (accelerated emissions): 3⅓ percent loss.
  - By 2100 (if net zero is not achieved globally in the next few decades):
    - “Moderate” scenario: 2½ percent (lower bound of range).
    - ‘Hot’ scenario: 7 percent (upper bound of range).
  - Statement on range: average income losses from climate change in LAC will also rise over time, to 2½–7 percent by 2100 (‘Moderate’ and ‘Hot’ scenarios).
- Caveats and limitations:
  - Estimates exclude extreme climate shocks (which place the heaviest burden on countries in the Caribbean and CAPDR).
  - Estimates likely underestimate losses because they assume steady progress with adaptation across all countries and do not account for potential non-linearities related to tipping points.
  - Estimates likely underestimate the future impact of sea level rise on small island states in the LAC region.

### Role of adaptation and policy implications
- Effect of adaptation speed under the ‘Hot’ scenario (percent loss of per capita GDP relative to no climate change):
  - Baseline adaptation assumption: adaptation to an increment of global warming takes 30 years.
  - Fast adaptation assumption: 10-year period.
- Without significant adaptation efforts (No adaptation):
  - Average income losses in LAC under accelerated GHG emissions could rise to 9 percent of per capita GDP by 2050 and 21 percent by 2100.
  - These compare to a baseline of 3⅓ percent by 2050 and 7 percent by 2100 under the baseline adaptation assumption.
- With rapid adaptation:
  - Losses could be contained to 1½ percent of per capita GDP by 2050 and 2½ percent by 2100 under the ‘Hot’ scenario.
- Policy recommendations and priorities emphasized:
  - Public investment in adaptation.
  - Policies to close climate finance gaps.
  - Improved territorial planning.
  - Focus on countries with higher poverty, weaker infrastructure, and limited financial resources, which are likely to have less adaptive capacity and face larger economic losses.
- Additional note: The IMF book “Climate Change Challenges and Opportunities in Latin America and the Caribbean” provides an in-depth analysis of the returns on adaptation policies in LAC.

*Source: Online Annex 6, Regional Economic Outlook—Western Hemisphere, October 2024, International Monetary Fund.*

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_Source: https://www.imf.org/-/media/files/publications/reo/whd/2024/october/english/onlineannex6.pdf_