Climate change is a global phenomenon and its effects are felt worldwide, but they are unevenly distributed. The impacts of climate change are particularly severe around the equator and in the global south.
Droughts, storms, and hail lead to crop failures, floods destroy production facilities and transport infrastructure, heat reduces human performance and rising sea levels threaten coastal habitats. All of these impacts reduce economic output. This affects directly impacted sectors such as agriculture, as well as the production of a wide range of other goods and tourism.
Moreover, in an interconnected world, these local impacts of climate change are transmitted not only to neighbouring countries, but also to distant countries through various channels.
Climate change impacts are transmitted along international supply chains through a country's foreign trade. The profitability and returns on capital flows and assets held abroad may be reduced in the short term or devalued in the long term as a result of climate damage. Climate change also plays a role in exacerbating existing conflicts, which can increase migration pressures.