The progressive impact of a changing climate brings new challenges for public finances and macro-fiscal sustainability. Physical risks, such as climate-related disasters, are increasing and have the potential to diminish the productivity of human, natural and social capital, thereby impeding economic growth and introducing direct and contingent fiscal liabilities. The potential impacts of transition risks have been made more real with the introduction of the EU's Carbon Border Adjustment Mechanism, with manufacturing sectors being particularly exposed due to their relatively high emissions intensity and trade exposure. Assessment of such risks is essential for climate risk management.
A two-day conference on Climate Fiscal Risks – What, Why and How, organized with the support from the European Union Trust Fund on Strengthening Fiscal Governance in the Western Balkan countries, was held on February 24-25, 2025, in Vienna, Austria. The conference convened senior officials on macro-fiscal policy, climate fiscal risk assessments, central banks, fiscal councils, the World Bank, OECD/Sigma, and the IMF. The objective was to generate and share knowledge on practical approaches to climate fiscal risks assessment, modeling, and reporting, and their integration into the budgetary process.