Macroeconomic impacts of climate change on the blue economy sectors of southern European islands

Abstract

Island communities are among the first and most adversely affected by the impacts of global climate change. Islands are vulnerable to climate change because of their isolated geography, large coastal areas, and low economic diversification. This paper presents a model-based evaluation of the macroeconomic impacts of climate change on the Blue Economy of southern European islands. We consider climate change impact chains on tourism, maritime transport, and electricity demand in a downscaled modeling framework for different climatic scenarios to the end of the century. Our findings show important economic losses in all climatic scenarios, yet economic damages under an RCP8.5 scenario more than doubled compared to a RCP2.6 pathway. Magnitudes of impacts vary across islands, depending on the level of economic diversification and geographic remoteness. The effects of climate change on the tourism sector are detrimental to the islandic economies, given the sector’s complex value chain and dominant position in value added. Similarly, increasing electricity demand for cooling and water desalination puts additional stress on the economy of the islands.