Systemic assessment of societal and human vulnerabilities from agricultural yields and labour productivity shocks under two climate change scenarios.

Climate change is projected to affect agricultural systems and labour input efficiency in a spatially heterogeneous manner and propagate globally to production, trade, and income outcomes across regions. This study examines, within the CROSSEU project, the impacts of climate change on agriculture and labour productivity from a global perspective, with a focus on subnational-level analysis across EU27 and the UK, while also considering their main trade partners. To assess the economy-wide implications of climate-induced impacts on agricultural outputs and labour productivity we use a subnationally disaggregated version of the ENGAGE model (ENvironmental Global Applied General Equilibrium). RCP4.5 and RCP8.5 climate change scenarios have been chosen to extract the climate shocks applied within this study.

First, to assess the implications of warming on agricultural outputs, we use estimates of crop yield responses to temperature increases. Second, empirical evidence of heat stress effect on labour productivity have been used to estimate the reduction of work capacity due to rising temperatures across the entire economy on sectors such as agriculture, manufacturing, and services.

Reduce crop yields will trigger sharp price spikes that disproportionately affect lower-income regions, underscoring a widening global equity gap. While production losses and price increases reduce global income and welfare, their regional impacts create winners and losers. Global GDP remains relatively stable under yield shocks but regional disparities in income and welfare intensify. Tropical and subtropical developing regions not only face yield and production losses but also reduced export competitiveness, resulting in larger welfare losses. The findings highlight the need for targeted adaptation strategies in vulnerable regions and reinforce the importance of ambitious global mitigation efforts to address the unequal distribution of climate risks.

Labour efficiency reduction constrains economic activity altering relative production costs and income generation across sectors and regions. Labour productivity impacts depend on regional economic structures, factor income composition, patterns of intersectoral linkages and international trade. We extract productivity losses effects and transmissions through changes in production, prices, incomes and poverty levels. Across scenarios, productivity losses translate into reductions in sectoral output, GDP, and welfare, but the extent varies substantially across regions. As reduced incomes and price adjustments propagate, the consequences become increasingly evident in welfare and poverty outcomes, particularly in developing regions where households rely heavily on labour earnings. This synthesis suggests that priorities for action should be guided primarily by where labour productivity losses translate into welfare and poverty impacts, rather than by sectoral output or GDP effects alone.

Rather than treating yield or labour shocks in isolation, the economy-wide model ENGAGE reflects regional intersectoral linkages and trade flows to simulate systemic effects. This comprehensive assessment supports policymakers in anticipating direct and indirect consequences of climate impacts—such as regional income disparities, pressure on trade and changes in comparative advantages — and in crafting coordinated, cross-sectoral adaptation responses.