Climate change is already having impacts on economic performance, including on GDP, labour and multi-factor productivity (MFP), and will have even greater impacts in the future. But while many studies have explored the economy-wide impacts of climate change on growth and productivity, there has been less focus on the nature and size of the various – current and future – impacts of climate change on a range of other productivity measures.

Mainstream economic modelling studies have long suggested that the long-term impacts of climate change on growth and productivity would be relatively small. However, other studies question those findings and their underlying assumptions and point to much larger, potentially devastating, impacts on growth and productivity, including impacts linked to the risk of the climate passing so-called 'tipping points', e.g. the disintegration of the Greenland ice sheet or the saturation of the oceans as a carbon sink.

The main policy challenge is how to design climate change policies to meet the global objective of net zero – where it will be essential to meet this goal in the shortest possible timeframe to reduce the overall volume of greenhouse gas emissions – while also supporting productivity and wellbeing. To meet this challenge, governments will need to shape markets for low-carbon products and services, e.g., through regulation and standards, and give direction to technological change to accelerate low-carbon innovation and foster the uptake and diffusion of low-carbon technologies. Innovation policies are particularly important, as they can help bring down the cost of climate policy action, and simultaneously support productivity growth.