The research warns that the climate crisis is already imposing heavy costs far beyond environmental indicators, manifesting instead in overwhelmed hospitals, lost productivity, damaged infrastructure and mounting pressure on public finances.
Between 1980 and 2021, extreme weather and climate-related disasters caused more than €560bn in economic losses across the EU's 27 member states, the study finds. Only around a quarter to a third of those losses were covered by insurance, leaving governments and taxpayers to absorb the bulk of the damage.
Looking ahead, the researchers project that production losses across the bloc could exceed €5tn by 2050. Under a scenario of 3C global warming, overall GDP across the EU could shrink by roughly 10%.
Professor Sigrid Stagl, who led the study commissioned by Austrian Green MEP Lena Schilling, describes this widening gap between damage and insurance coverage as a growing fiscal threat. She argues that climate impacts are no longer one-off shocks but recurring liabilities that are steadily embedding themselves into national budgets.
Governments as insurers of last resort
Presenting the findings in Brussels, Stagl said governments are increasingly acting as insurers of last resort, footing the bill for disaster relief, rebuilding costs, healthcare pressures and social compensation after extreme events.
Unchecked warming, she warned, is also undermining private insurance markets. Rising premiums, shrinking coverage and entire regions becoming uninsurable could ultimately trigger market failure, forcing states to intervene with costly bailouts.
"Climate damage is no longer external or hypothetical," the study argues. "It is being internalised on public balance sheets and treated as a permanent fiscal burden."
The researchers estimate that investing just 1–2% of global economic output in climate mitigation and adaptation could avert losses equivalent to 11–27% of GDP. In financial terms, every dollar spent could generate savings of between $5 and $14.
Drawing on data from the International Monetary Fund, the study suggests that early adaptation could cut total climate-related losses by as much as 70%. Delayed action, by contrast, risks pushing annual costs above $100bn worldwide.
"Each year of hesitation increases long-term costs, deepens inequality and weakens Europe's competitiveness," Stagl said. "Inaction is the real liability. Climate action is the only economically solvent strategy."
She also warned that between two and five million jobs across the EU could be at risk by 2040 if governments fail to act decisively.
From theory to policy
Some EU countries are already moving to strengthen climate preparedness. Portugal, which has recently been battered by a succession of destructive storms, is developing a new framework to adapt its electricity system to more volatile weather conditions.
The plan includes mapping regions most exposed to wildfires and storms and assessing options such as reinforcing power lines, burying cables in high-risk areas and deploying hybrid resilience technologies.
"We have a responsibility to adapt the electrical system to prevent disruptions and guarantee security of supply," said Portuguese energy minister Maria da Graça Carvalho.
The push for resilience comes amid mounting warnings from EU climate advisers that Europe remains dangerously underprepared for the scale of extreme events expected in coming decades.
According to the Vienna University study, climate-related health impacts already claim up to 80,000 lives a year in Europe and cost the economy an estimated €400bn annually.
"The climate crisis is turning into a billion-euro graveyard for prosperity," Schilling said. "These losses are not inevitable. They are the price of delay."