Macroeconomic Stability in The Era of Climate Change: A Systematic Review of Environmental Risks and Economic Costs
DOI:
https://doi.org/10.65820/ejems-5vol1-issue1-2025Keywords:
Macroeconomic Stability, Climate Change, SDG, Environmental Risks, Economic CostsAbstract
Purpose: Climate change presents escalating threats to macroeconomic stability, primarily through increasing physical hazards and complex transitional dynamics. This study aims to systematically review and synthesize empirical evidence on how climate-related risks disrupt economic systems and fiscal governance across regions.
Methodology: This systematic literature review synthesizes findings from 35 peer-reviewed empirical studies published between 2018 and 2025, selected using PRISMA guidelines and sourced primarily from SCOPUS and Google Scholar.
Result: The analysis identifies key climate-related risks destabilizing macroeconomic systems: rising CO₂ emissions, extreme weather events, sector-specific vulnerabilities, and financial system fragility. The agriculture and energy sectors were found to be particularly exposed, with low-income and climate-vulnerable economies experiencing disproportionate impacts. Furthermore, climate policy tools, such as carbon pricing and emission regulations, introduce new forms of volatility and fiscal pressure, particularly for carbon-intensive industries. Forecasting models are widely used to estimate economic impacts, but their accuracy is constrained by data limitations and climate uncertainty.
Novelty and contribution: This study contributes to the literature by integrating recent empirical findings into a comprehensive review that connects climate risk, sectoral vulnerability, and macroeconomic instability. A significant insight is the role of climate uncertainty in undermining policy confidence, delaying regulatory responses, and weakening macroeconomic governance. The review also emphasizes the inadequacy of current forecasting tools and calls for improved climate–economic modeling.
Practical and social implications: This study highlights the need for improved institutional capacity in climate-vulnerable regions, where technical skills and tools for interpreting climate-economic data are limited.
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Copyright (c) 2025 Dr. Victoria Adekomaya, Mr. Abdulwahid Tella, Mrs. Sekinah A. Yusuf-Saba, Mr. Ibrahim O. Salami , Miss Zaynab Motunrayo Lukman (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
This article is licensed under a Creative Commons Attribution 4.0 International License.
