## 1. The Impact of Climate Change on the Forestry Sector

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### Major themes
- The chapter addresses the impact of climate change on the forestry sector.
- Related topics in the same unit include sea level rise and policies to facilitate private adaptation.
- Expected analytic focus areas: historical and projected climate variables for the Solomon Islands; sea-level rise projections and economic costs; impacts on fisheries and forestry; macroeconomic effects of warming on Real GDP; spatial vulnerability by coastline distance and elevation; policy approaches to enable private adaptation.

### Climate trends and projections (Solomon Islands)
- Historical and baseline observations:
  - Average annual temperatures during the 1985–2014 baseline were around 26-27 °C.
  - Baseline temperatures were approximately 0.4–0.6 °C above pre-industrial levels.
  - Temperatures are estimated to have risen by an additional ~0.5 °C by 2020.
  - Solomon Islands experiences high interannual rainfall variability linked to ENSO.
- Projected temperature and precipitation changes:
  - Median model projections show temperature increases of 0.9–1.2 °C by 2050 and 12.2 °C by 2085, relative to the 1985–2014 baseline, depending on emissions pathways.
  - In a high-emissions scenario (SSP3-7.0, 90th percentile), warming could reach 3°C by 2085.
  - Climate models do not project changes of total annual rainfall compared to the 1960-2015 average.
  - Natural rainfall variability, rather than long-run average changes, is expected to drive many economic impacts.
- Climate extremes and hazards:
  - Indices considered: TX35 (extreme heat), CDD (consecutive dry days), Rx1day and Rx5day (intense rainfall).
  - Since 1960, there are no episodes of widespread extreme heat, and none are projected through the end of the century.
  - Short-duration heavy rainfall events (Rx1day and Rx5day) have intensified in recent decades and are projected to slightly increase toward the end of the century.
  - The drought-related index (CDD) remains low and is projected to stay at the same levels.
  - Intense precipitation events are identified as the primary climate hazard and main source of recurring macroeconomic risks, implying greater risk from repeated flood-related damage to infrastructure and housing than from heat-related shocks.
- Sea-level rise projections (relative to 2000 level by 2100):
  - 0.52 meters under a low-emissions pathway (RCP2.6).
  - 0.62 meters under a moderate pathway (RCP4.5).
  - up to 0.79 meters under a very high emissions scenario (RCP8.5).
  - Local effects can exceed global mean due to coastal erosion, storm-driven surges, and ENSO-related temporary elevation in regional sea levels.
  - Much of the population, essential infrastructure, and economic activity are in low-elevation coastal zones, making sea-level rise a slow-moving but potentially irreversible economic and fiscal risk.
- Tropical cyclones and marine ecosystems:
  - Historical cyclone frequency shows no clear long-term trend; variability is high and closely linked to ENSO.
  - Projections indicate cyclone frequency is likely to remain stable or decline slightly, but the intensity of the strongest cyclones is expected to increase, with heavier rainfall and higher peak wind speeds.
  - Warmer waters, acidification, and declining oxygen can alter fish migration and reduce productivity of key stocks.
  - Fisheries currently contribute around 4 percent of GDP and support livelihoods and food security.
  - FishMIP projections: exploitable fish biomass in Solomon Islands’ waters could decline by 11 percent under both low- (SSP1-2.6) and high-emissions (SSP5-8.5) scenarios by 2050, and by up to 50 percent under high emissions (SSP5-8.5) by 2100.

### Macroeconomic impacts and methodology
- Method and data:
  - Analysis uses empirical literature and sectoral modeling to quantify potential GDP losses from gradual temperature increases, fisheries and forestry impacts, and costs associated with sea-level rise.
  - The long-run response of aggregate GDP growth to temperature trends is estimated using econometric methods applied to data from 172 countries from 1960.
  - The model focuses on variations in warming rates and integrates four temperature scenarios from CMIP6 simulations.
- Projected GDP impacts from rising temperatures (end of century):
  - A moderate acceleration of warming (SSP2-4.5) is projected to reduce GDP by approximately 1 percent compared to baseline projections.
  - The worst-case warming scenario (SSP3-7.0 90th p.) could result in a reduction of GDP by about 4 percent.
  - A scenario consistent with the Paris Agreement (SSP1-2.6) may result in slightly higher GDP compared to a scenario in which recent warming trends continue indefinitely.
- Adaptation assumptions and implications:
  - The impact estimates assume adaptation can offset the warming trend after 30 years.
  - Slower adaptation leads to higher costs; no adaptation could double the economic cost of rising temperatures.
  - Policy implication: facilitating private adaptation (e.g., increased air conditioning penetration, farming innovations) and direct government interventions for public goods (e.g., early warning systems, public health) are essential.

### Fisheries sector findings
- Sector contributions and projections:
  - The fishing sector accounted for 5 percent of GDP in 2024 and generated export revenues equal to 4 percent of GDP.
  - Biomass potential in the Solomon Islands EEZ is projected to decline by 10.7 percent by 2045 in a moderate scenario.
  - FishMIP projections: exploitable fish biomass could decline by 11 percent by 2050 under SSP1-2.6 and SSP5-8.5, and by up to 50 percent by 2100 under SSP5-8.5.
- Fiscal and policy implications:
  - Declines in exploitable biomass could reduce value added and fiscal revenues from government sales of fishing permits.
  - The Nauru Agreement and its Vessel Day Scheme (VDS) reallocate fishing days among members and may decrease future allocations and revenues for the Solomon Islands if local fish stocks drop.
  - Opportunities include strengthening regional collaboration and expanding the role as a fish processing hub to offset potential losses.

### Forestry sector findings (national and regional)
- Baseline and projected sector importance:
  - The forestry sector was responsible for 5 percent of GDP in 2024 and 33 percent of goods exports.
  - Simulations using a global timber model indicate that sustainable harvesting of commercial timber can increase in Oceania largely due to CO2 fertilization.
  - Applying regional results to Solomon Islands projects a 13 percent increase in potential harvest volume by mid-century compared to present levels.
- Global and long-term projections (from Box 1 synthesis):
  - Integrated model results project global forest productivity and area to increase until around 2150, leading to higher timber supply, lower timber prices, and increased consumer welfare.
  - Global forest carbon stocks are projected to rise by 6–10 percent by 2100, with further increases or regional declines possible by 2200 depending on the scenario.
  - Distributional outcomes: temperate and boreal regions expected to gain most; tropical regions may experience losses, especially under high-emission scenarios.
  - Post-2150 risks: forest area may decline, particularly under RCP 8.5; share of unmanaged forests could decrease; projections sensitive to model choice and omit some disturbance factors (wildfires, pests).
- Management and governance caveats:
  - Positive impacts on GDP and the balance of payments depend critically on efficient, sustainable management; inefficient practices and illegal logging could undermine benefits and increase incentives for illicit activity.

### Policy recommendations and adaptation measures
- Facilitate private adaptation:
  - Promote technologies and practices such as increased air conditioning penetration and farming innovations to offset warming impacts.
  - Encourage private-sector investments that reduce vulnerability to intense precipitation and flood-related damage.
- Government actions for public goods:
  - Invest in early warning systems and public health measures to reduce climate-related macroeconomic risks.
  - Strengthen coastal defenses and planning given sea-level rise projections and concentration of population and infrastructure in low-elevation coastal zones.
- Sector-specific policy actions:
  - Fisheries: strengthen regional collaboration (e.g., within the Nauru Agreement context), diversify into fish processing, and adapt permit and revenue frameworks to changing stock dynamics.
  - Forestry: implement sustainable and efficient forestry practices to capture potential gains from CO2 fertilization and rising demand; strengthen governance to limit illegal logging and ensure long-term value added.
- Long-term mitigation and precaution:
  - Near-term mitigation actions can help avoid negative long-term consequences for timber markets and forest carbon storage, acknowledging post-2150 uncertainties and risks.

*Source: sipea2026069 - 1. The Impact of Climate Change on the Forestry Sector (PDF chapter), canonical URL: https://www.imf.org/-/media/files/publications/selected-issues-papers/2026/english/sipea2026069.pdf*

### 1. The Impact of Climate Change on the Forestry Sector _____________________________ 11

### 1. The Impact of Climate Change on the Forestry Sector

### Major themes covered
- The chapter addresses the impact of climate change on the forestry sector.
- Related topics in the same unit include sea level rise and policies to facilitate private adaptation.

### Figures referenced (by title)
- Figure 1: Historical Temperature and Precipitations for Solomon Islands
- Figure 2: Projected Annual Temperature, Total Annual Precipitations for the Solomon Islands
- Figure 3: Projected Changes of Extreme Precipitation and Dry Periods
- Figure 4: Sea-Level Rise Projections Relative to 2000 level (meters)
- Figure 5: Projected Changes of Exploitable Fish Biomass in the Solomon Islands’ Waters
- Figure 6: Impact of Warming Trends on Real GDP, Solomon Islands (percentage)
- Figure 7: Cumulative Density Functions of Population and Economic Variables, at Different Distances from the Coastline and Different Elevations
- Figure 8: Cost of Sea-Level Rise (in percentage of GDP), Annual Average 2020-2099

### Key sections in the unit
- 1. The Impact of Climate Change on the Forestry Sector — primary focus of the chapter.
- 2. Estimating the Cost of Sea Level Rise — quantification of sea-level rise impacts.
- 3. Policies to Facilitate Private Adaptation — policy measures to enable private-sector responses.

### Expected analytic focus areas (as signaled by headings and figures)
- Historical and projected climate variables for the Solomon Islands (temperature, precipitations, extreme precipitation, dry periods).
- Projections of sea-level rise relative to year 2000 and associated economic cost metrics (including an annual average cost metric for 2020-2099 expressed in percentage of GDP).
- Impacts on natural-resource sectors adjacent to forestry, including exploitable fish biomass in Solomon Islands’ waters.
- Macroeconomic effects of warming trends on Real GDP for the Solomon Islands (expressed in percentage).
- Spatial analysis of population and economic vulnerability by distance from the coastline and by elevation (via cumulative density functions).
- Policy approaches to support private adaptation in response to the above impacts.

*Source: sipea2026069 - 1. The Impact of Climate Change on the Forestry Sector (PDF chapter), canonical URL: https://www.imf.org/-/media/files/publications/selected-issues-papers/2026/english/sipea2026069.pdf*

### References ____________________________________________________________________________ 19

### References — Climate Change, Macroeconomic Risks, and Adaptation in the Solomon Islands (June 10, 2026)

### A. Climate trends and projections
- Climate context and recent observations:
  - Average annual temperatures during the 1985–2014 baseline were around 26-27 °C.
  - Baseline temperatures were approximately 0.4–0.6 °C above pre-industrial levels.
  - Temperatures are estimated to have risen by an additional ~0.5 °C by 2020.
  - Solomon Islands experiences high interannual rainfall variability linked to ENSO.
- Projected temperature and precipitation changes:
  - Median model projections show temperature increases of 0.9–1.2 °C by 2050 and 12.2 °C by 2085, relative to the 1985–2014 baseline, depending on emissions pathways.
  - In a high-emissions scenario (SSP3-7.0, 90th percentile), warming could reach 3°C by 2085.
  - Climate models do not project changes of total annual rainfall compared to the 1960-2015 average.
  - Natural rainfall variability, rather than long-run average changes, is expected to drive many economic impacts.
- Climate extremes and hazards:
  - Indices considered: TX35 (extreme heat), CDD (consecutive dry days), Rx1day and Rx5day (intense rainfall).
  - Since 1960, there are no episodes of widespread extreme heat, and none are projected through the end of the century.
  - Short-duration heavy rainfall events (Rx1day and Rx5day) have intensified in recent decades and are projected to slightly increase toward the end of the century.
  - The drought-related index (CDD) remains low and is projected to stay at the same levels.
  - Intense precipitation events are identified as the primary climate hazard and main source of recurring macroeconomic risks, implying greater risk from repeated flood-related damage to infrastructure and housing than from heat-related shocks.
- Sea-level rise:
  - Scientific projections point to sea-level increases relative to 2000 levels by 2100 of roughly:
    - 0.52 meters under a low-emissions pathway (RCP2.6),
    - 0.62 meters under a moderate pathway (RCP4.5),
    - up to 0.79 meters under a very high emissions scenario (RCP8.5).
  - Local effects can exceed global mean due to coastal erosion, storm-driven surges, and ENSO-related temporary elevation in regional sea levels.
  - Much of the population, essential infrastructure, and economic activity are in low-elevation coastal zones, making sea-level rise a slow-moving but potentially irreversible economic and fiscal risk.
- Tropical cyclones and marine ecosystems:
  - Historical cyclone frequency shows no clear long-term trend; variability is high and closely linked to ENSO.
  - Projections indicate cyclone frequency is likely to remain stable or decline slightly, but the intensity of the strongest cyclones is expected to increase, with heavier rainfall and higher peak wind speeds.
  - Warmer waters, acidification, and declining oxygen can alter fish migration and reduce productivity of key stocks.
  - Fisheries currently contribute around 4 percent of GDP and support livelihoods and food security.
  - FishMIP projections: exploitable fish biomass in Solomon Islands’ waters could decline by 11 percent under both low- (SSP1-2.6) and high-emissions (SSP5-8.5) scenarios by 2050, and by up to 50 percent under high emissions (SSP5-8.5) by 2100.
- Forests:
  - CO2 fertilization is expected to lead to faster and more robust tree growth under projected temperature and precipitation ranges through the end of the century.
  - With sustainable and efficient forestry practices, potential exists for higher productivity, increased timber output, greater value added, and expanded export opportunities.

### B. Macroeconomic impacts
- Overview and methodology:
  - Analysis uses empirical literature and sectoral modeling to quantify potential GDP losses from gradual temperature increases, fisheries and forestry impacts, and costs associated with sea-level rise.
  - The long-run response of aggregate GDP growth to temperature trends is estimated using econometric methods applied to data from 172 countries from 1960 (Kahn and others, 2021; Centorrino and others, 2025).
  - The model focuses on variations in warming rates and integrates four temperature scenarios from CMIP6 simulations.
- Rising temperatures — projected GDP impacts:
  - At the end of the century:
    - A moderate acceleration of warming (SSP2-4.5) is projected to reduce GDP by approximately 1 percent compared to baseline projections.
    - The worst-case warming scenario (SSP3-7.0 90th p.) could result in a reduction of GDP by about 4 percent.
    - A scenario consistent with the Paris Agreement (SSP1-2.6) may result in slightly higher GDP compared to a scenario in which recent warming trends continue indefinitely.
  - Assumptions on adaptation:
    - The impact estimates assume adaptation can offset the warming trend after 30 years.
    - Slower adaptation leads to higher costs; no adaptation could double the economic cost of rising temperatures.
  - Policy implication:
    - Facilitating private adaptation (e.g., increased air conditioning penetration, farming innovations) and direct government interventions for public goods (e.g., early warning systems, public health) are essential.
- Fisheries sector impacts:
  - The fishing sector accounted for 5 percent of GDP in 2024 and generated export revenues equal to 4 percent of GDP.
  - Biomass potential in the Solomon Islands EEZ is projected to decline by 10.7 percent by 2045 in a moderate scenario.
  - Declines in exploitable biomass could reduce value added and fiscal revenues from government sales of fishing permits.
  - The Nauru Agreement and its Vessel Day Scheme (VDS) reallocate fishing days among members and may decrease future allocations and revenues for the Solomon Islands if local fish stocks drop.
  - Opportunities include strengthening regional collaboration and expanding the role as a fish processing hub to offset potential losses.
- Forestry sector impacts:
  - Simulations using a global timber model indicate that sustainable harvesting of commercial timber can increase in Oceania largely due to CO2 fertilization.
  - Applying regional results to Solomon Islands projects a 13 percent increase in potential harvest volume by mid-century compared to present levels.
  - The forestry sector was responsible for 5 percent of GDP in 2024 and 33 percent of goods exports.
  - Positive impacts on GDP and the balance of payments depend critically on efficient, sustainable management; inefficient practices and illegal logging could undermine benefits and increase incentives for illicit activity.

*Source: "CLIMATE CHANGE, MACROECONOMIC RISKS, AND ADAPTATION IN THE SOLOMON ISLANDS" (June 10, 2026), selected issues paper.*

### Box 1. The Impact of Climate Change on the Forestry Sector

### Box 1. The Impact of Climate Change on the Forestry Sector

### Global long-term projections and methods
- Integrated approach: combines climate scenarios (RCP 2.6 and RCP 8.5), socio-economic pathways, a dynamic global vegetation model, and an economic model of the timber sector (Favero and others, 2021).
- Time horizon: simulations extend through the year 2200.
- Key projected outcomes:
  - Global forest productivity and area are projected to increase until around 2150, leading to higher timber supply, lower timber prices, and increased consumer welfare.
  - Global forest carbon stocks are projected to rise by 6–10 percent by 2100, with further increases or regional declines possible by 2200 depending on the scenario.
- Distributional outcomes:
  - Temperate and boreal regions (e.g., Canada and Russia) are expected to gain the most.
  - Tropical regions (e.g., Brazil) may experience losses, especially under high-emission scenarios.
- Post-2150 risks and uncertainties:
  - After 2150, forest area may decline, particularly under RCP 8.5.
  - The share of unmanaged forests—which are important for biodiversity—could decrease.
  - Projections are sensitive to the choice of climate and vegetation models and omit some factors such as increased disturbances (e.g., wildfires, pests) and changes in timber demand for energy and construction.
- Policy implication: near-term mitigation actions can help avoid negative long-term consequences for both timber markets and forest carbon storage.

### Oceania / Solomon Islands regional application and projection methods
- Model output usage: IMF staff used Favero and others (2021) model output for the Oceania region.
- Experimental design:
  - Two emissions scenarios and four climate models, producing eight model/scenario combinations.
  - Projected changes of industrial timber production calculated for years 2035, 2045 and 2055 relative to a reference scenario using present climate.
  - Median change across the eight model/scenario combinations was computed.
  - Projected annual changes of sectoral GDP were obtained by interpolating linearly rates of change in years without model output.
- Indexing: Projected Production of Industrial Roundwood in the Solomon Islands is presented with index base 2025 = 1.
- Regional projection summary:
  - Commercial timber production is projected to rise even without climate change due to increased global demand and higher prices.
  - Larger gains are expected later in the century from stronger fertilization effects and growing market demand.

*Source: IMF staff summary of Box 1 content in sipea2026069*

### References

### sipea2026069 - References

### Sea level and coastal impacts
- Albert, Simon, Kirsten Abernethy, Badin Gibbes, Alistair Grinham, Nixon Tooler, and Shankar Aswani. "Cost-effective methods for accurate determination of sea level rise vulnerability: A Solomon Islands example." Weather, Climate, and Society 5, no. 4 (2013): 285-292. Open Access.
- Diaz, Delavane B. "Estimating global damages from sea level rise with the Coastal Impact and Adaptation Model (CIAM)." Climatic Change 137, no. 1 (2016): 143-156.
- Kopp RE, Horton R, Little C, Mitrovica JX, Oppenheimer M, Rasmussen DJ, Strauss BH, Tebaldi, C (2014) Probabilistic 21st and 22nd century sea-level projections at a global network of tide gauge sites. Earth's Future pp 383{406}.

### Climate data, reanalyses, and projections
- Copernicus Climate Change Service, Climate Data Store, (2021): CMIP6 climate projections. Copernicus Climate Change Service (C3S) Climate Data Store (CDS). DOI: 10.24381/cds.c866074c
- Harris I, Osborn TJ, Jones P and Lister D (2020). Version 4 of the CRU TS Monthly High-Resolution Gridded Multivariate Climate Dataset. Scientific Data (https://doi.org/10.1038/s41597-020-0453-3).
- Hersbach, H., Bell, B., Berrisford, P., Biavati, G., Horányi, A., Muñoz Sabater, J., Nicolas, J., Peubey, C., Radu, R., Rozum, I., Schepers, D., Simmons, A., Soci, C., Dee, D., Thépaut, J-N. (2023): ERA5 hourly data on single levels from 1940 to present. Copernicus Climate Change Service (C3S) Climate Data Store (CDS), DOI: 10.24381/cds.adbb2d47.
- IPCC, 2019: IPCC Special Report on the Ocean and Cryosphere in a Changing Climate. [H.-O. Pörtner, D.C. Roberts, V. Masson-Delmotte, and others (eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA, 755 pp.https://doi.org/10.1017/9781009157964

### Tropical cyclones, fisheries, and marine ecosystems
- Chand, Savin; Webb, Leanne; Grose, Michael; Gooley, Geoff. Tropical cyclones and climate change: Implications for Pacific Island countries. Aspendale: CSIRO; 2022. csiro:EP2021-3604. https://doi.org/10.25919/pbtc-1y82
- FAO, 2024: Projected impacts of climate change on exploitable marine fish biomass: Results from the Fisheries and Marine Ecosystem Model Intercomparison Project (FishMIP). FAO Fisheries and Aquaculture Technical Paper No. 710. Rome, FAO.https://doi.org/10.4060/cc9783en
- Favero, Alice, Robert Mendelsohn, Brent Sohngen, and Benjamin Stocker. "Assessing the long-term interactions of climate change and timber markets on forest land and carbon storage." Environmental Research Letters 16, no. 1 (2021): 014051.

### Macroeconomic effects and fiscal policy related to climate
- Aligishiev, Z., M. Bellon, and E. Massetti. 2022. “Macro-Fiscal Implication of Adaptation to Climate Change.” IMF Staff Climate Note 2022.002, International Monetary Fund, Washington, DC.
- Bellon, M. and E. Massetti. 2022a. “Economic Principles for Integrating Adaptation to Climate Change into Fiscal Policy.” IMF Staff Climate Note 2022.001, International Monetary Fund, Washington, DC.
- Bellon, M. and E. Massetti. 2022b. “Planning and Mainstreaming Adaptation to Climate Change in Fiscal Policy.” IMF Staff Climate Note 2022.003, International Monetary Fund, Washington, DC.
- Kahn, Matthew E., Kamiar Mohaddes, Ryan NC Ng, M. Hashem Pesaran, Mehdi Raissi, and Jui-Chung Yang (2021). “Long-term macroeconomic effects of climate change: A cross-country analysis.” Energy Economics 104: 105624.
- Mohaddes, K., and M. Raissi. 2025. “Rising Temperatures, Melting Incomes: Country-Specific Macroeconomic Effects of Climate Scenarios.” PLOS Climate 4(9): e0000621. https://doi.org/10.1371/journal.pclm.0000621
- Samuele Centorrino, Emanuele Massetti, Mehdi Raissi, and Filippos Tagklis. "How to Include the Effects of Rising Temperatures in Long-Term GDP Projections", IMF How To Notes 2025, 009 (2025).

### Solomon Islands national policies and adaptation documents
- Government of Solomon Islands, Ministry of Environment, Climate Change, Disaster Management and Meteorology. 2023.Solomon Islands National Climate Change Policy 2023–2032. Honiara: Government of Solomon Islands.
- Ministry of Environment, Conservation and Meteorology. 2008.Solomon Islands National Adaptation Programme of Action. Honiara: Government of Solomon Islands; United Nations Development Programme.

### Geospatial, population, and climate datasets and guides
- Bondarenko M., Priyatikanto R., Tejedor-Garavito N., Zhang W., McKeen T., Cunningham A., Woods T., Hilton J., Cihan D., Nosatiuk B., Brinkhoff T., Tatem A., Sorichetta A. (2025). The spatial distribution of population in 2015-2030 at a resolution of 30 arc (approximately 1km at the equator) R2025A version v1. Global Demographic Data Project - Funded by The Bill and Melinda Gates Foundation (INV-045237). WorldPop - School of Geography and Environmental Science, University of Southampton. DOI:10.5258/SOTON/WP00845
- Woods, D., T. McKeen, A. Cunningham, R. Priyatikanto, A. Sorichetta , A.J. Tatem and M. Bondarenko. 2024 "WorldPop high resolution, harmonised annual global geospatial covariates. Version 1.0." University of Southampton: Southampton, UK. DOI:10.5258/SOTON/WP00772
- Massetti, E. and F. Tagklis (2024). FADCP Climate Dataset: Temperature and Precipitation. Reference Guide, Fiscal Affairs Department, International Monetary Fund, Washington DC.

*sipea2026069 - References*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2026/english/sipea2026069.pdf_