July 2026
Climate Change Committee: Quantifying the economic costs of climate risk to support a well-adapted UK
Cambridge Econometrics provided economic analysis to support the Climate Change Committee (CCC) in delivering its Fourth Independent Assessment of UK Climate Risk (CCRA4-IA), contributing to the report 'A Well-Adapted UK'.
The report sets out the most up-to-date assessment of the risks climate change poses to the UK, alongside recommendations for how the country can adapt to a more extreme and uncertain future.
Within this wider assessment, Cambridge Econometrics contributed as a subcontractor, providing economic analysis to quantifying the economic impacts of climate risks across key sectors, with a focus on water scarcity and the impact of excess heat on farmed landscapes. Working as part of a consortium including WSP, HR Wallingford and Cranfield University, we translated complex climate science into clear, monetised evidence to inform policy and investment decisions.
The UK is already facing climate risks such as water scarcity and excess heat, with potential economic impacts across sectors including energy, manufacturing and agriculture.
While these risks are well understood physically, their economic impacts are less clear, particularly which sectors are most exposed and where adaptation should be prioritised.
"By quantifying the economic costs of climate hazards, we help strengthen the evidence base underpinning the Committee’s advice and support more informed decision-making on where adaptation is most needed and where it can deliver the greatest value." Jen Dicks, Head of UK Environmental Policy, Cambridge Econometrics
Our approach
Our approach brought together economic analysis, climate modelling and input from sector specialists to develop robust estimates of the economic impacts of climate change. It included:
- An extensive literature review to identify, quantify and monetise climate impacts, including water scarcity and heat stress
- Integration with climate modelling produced by consortium partners
- Collaboration with sector specialists and industry stakeholders, including expert workshops
- Review by the CCC’s scientific advisers, providing an additional layer of independent validation.
This interdisciplinary approach enabled us to produce evidence that is both technically rigorous and directly relevant to policy.
Key Findings
Our analysis demonstrates that the economic impacts of climate change will be significant and highly uneven across sectors and the importance of targeted, sector-specific adaptation strategies.
Higher levels of warming lead to greater economic losses, increasing the urgency of adaptation.
Water-dependent sectors are particularly exposed, including:
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Freshwater-dependent energy generation (such as hydropower and thermal power plants).
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Water-intensive manufacturing industries, including food and drink and paper production.
Agricultural impacts differ by activity, with crop production more sensitive to extreme heat than livestock.
Variable renewable energy technologies such as wind and solar have minimal water requirements, meaning their deployment can contribute to both climate mitigation and adaptation objectives.
Impact
Our work fed directly into the CCC’s national assessment, strengthening the evidence base underpinning its recommendations and advice to government.
By translating climate risks into economic terms, our analysis helped:
- Identify where adaptation is most needed.
- Highlight which sectors are most vulnerable .
- Provide evidence to support the wider consortium’s evaluation of adaptions options and their benefits.
The wider assessment reinforces a clear message: the cost of inaction is likely to far outweigh the cost of acting now, underlining the importance of early and sustained adaptation.
View the full report here.
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