This blog post summarizes new research published in the European Economic Review that quantifies the growing economic damage from extreme weather across Europe and beyond.
Drawing on the study’s headline figures, recent 2025 climate events, and expert commentary, I explain what the numbers mean, why they likely understate the true social cost, and what policymakers should prioritize to reduce future losses.
Study highlights: immediate costs and fast-rising projections
The researchers estimate that Europe has already suffered €43 billion (about $50.6 billion) in immediate costs from climate-related disasters this year.
If current trends continue, those losses could climb to €129 billion (about $151.8 billion) annually by 2029 — a threefold increase in a short span.
These figures are not isolated: the summer of 2025 saw record heat waves in Japan and the U.S., deadly floods in Texas, and major wildfires on the U.S. West Coast.
Europe also experienced severe droughts that forced water rationing in parts of England and widespread wildfires across Portugal and Spain.
Projected losses contextualized by recent events
To understand the projection, consider what drove the study’s analysis: increased frequency and intensity of extremes that inflict direct damage on infrastructure, agriculture, and public services.
The researchers link hotter average temperatures to sharply higher wildfire risk — in the Iberian Peninsula, conditions made wildfires up to 40 times more likely than under historical climate norms.
The study’s immediate numbers capture the first-order costs: emergency response, damaged property, lost crops, and disrupted transport.
As lead author Sehrish Usman cautions, the “true costs” unfold slowly through job losses, health impacts, decreased productivity, and weakened local economies.
Why headline losses understate the full burden
Valuing disaster impacts requires choices about metrics and time horizons.
The study uses standard economic measures such as gross value added to estimate losses, which is useful for comparability but has limits.
As World Bank climate economist Stéphane Hallegatte notes, these metrics often miss the unequal impacts on poorer communities.
Poorer households and small businesses suffer disproportionately because they have fewer savings, limited insurance coverage, and weaker access to recovery funding.
Social costs — mental health, migration pressures, and long-term educational disruptions — are rarely captured in headline loss estimates.
Key takeaways for policymakers and planners
From my three decades in climate economics, the evidence is clear: the cost of inaction will exceed the cost of timely investment in mitigation and adaptation.
The study underscores two immediate priorities:
Researchers emphasize that timely, transparent projections are essential so policymakers can prioritize interventions where they deliver the biggest risk reduction per euro invested.
That means more localized risk assessments, better early warning systems, and integration of climate projections into fiscal planning.
Here is the source article for this story: New study finds deadly hot summer caused over $50 billion in losses: ‘The true costs … surface slowly’