Climate change is a major economic threat. With a new model, economist Andrea Titton shows how climate disasters can disrupt supply chains, how climate tipping points may cost trillions each year, and how international fairness is also at stake. But, he says, being better prepared now will actually prove cheaper than taking the gamble of hitting a climate tipping point. On Thursday, 2 October, Titton will defend his PhD thesis at the University of Amsterdam.
The growing number of climate disasters is reshaping the way economies function. Events that once seemed rare are becoming more frequent and widespread, while sudden and irreversible shifts in the climate are now a real possibility. ‘Whether willingly or unwillingly, societies will have to face the economic impact of climate change. And the later we act, the more expensive it becomes,’ says Titton.
Climate science and economic analysis
Unlike many economists, who study the impacts of catastrophes after they occur, Titton focuses on how economies behave in anticipation of climate change. ‘Most people think about the economy reacting once a catastrophe hits,’ he says. ‘But I wanted to understand how societies prepare, or fail to prepare, for risks they know are coming.’
For this purpose, Titton created mathematical models that integrate climate forecasts with economic dynamics. ‘Firms and policymakers still rely on economic models designed for a more stable world. But these tools are increasingly unfit to guide decisions in today’s climate reality,’ he says. ‘I tried to bring a more realistic model to the table and developed new technical methods to create it.’
Global tipping points
Using his models, Titton analysed the economic consequences of climate catastrophes on three levels:
- Firms and supply chains: when climate disasters like hurricanes or droughts strike in several places at once, they can disrupt many suppliers at the same time increasing the risk of big economic losses. Titton finds that firms often under-diversify their supply chains, creating fragility and large welfare losses.
‘You would expect companies to protect themselves by spreading their risks, but when many suppliers face the same climate threats, that logic breaks down,’ says Titton.
- Climate tipping points: Abrupt climate shifts, such as rapid permafrost thaw releasing methane, could accelerate warming dramatically. Titton calculates that such tipping points could cost the world economy up to €2.4 trillion per year.
‘Acting cautiously and paying the costs of reducing emissions today is cheaper than taking the gamble of hitting a climate tipping point.’
- International policy: Richer regions that face fewer risks from climate tipping points might use this to their advantage, shifting much of the burden of cutting emissions onto poorer regions, thus preventing them from fully realising their growth potential.
Overall, the findings show that while a warming climate demands cooperation and strong systems, it instead tends to divide economic actors and make economies more fragile.
Precaution is cheaper than gambling
‘The evidence is clear: when in doubt, we should choose caution, because even small mistakes in dealing with climate change can become very costly,’ says Titton.
Titton’s models could provide tools for governments and policymakers to evaluate the costs of inaction versus timely climate investment. ‘If the Netherlands or the EU want to know how much to invest in green energy, these models would help them weigh the risks of delay,’ Titton says.
Thesis details
Andrea Titton, 2025, 'Economic Consequences of Environmental Catastrophes'. Supervisors are Prof. C.G.H. Diks and Dr ir. F.O.O. Wagener.