From Stochastic Shocks to Structural Burden: Quantifying Systemic Climate-Related Economic Risks in the European Union

Despite the well-documented acceleration of climate-related economic losses in Europe, existing research has largely treated these damages as isolated stochastic events rather than as structurally embedded fiscal risks. This gap leaves EU fiscal governance frameworks inadequately prepared for the persistent, spatially concentrated, and temporally dependent nature of such losses. This study addresses this gap by investigating the systemic transformation of climate-related economic risks within the European Union, arguing that climate losses have evolved from unpredictable stochastic shocks into a persistent, structural burden on the European economy. Adopting a comprehensive multi-methodological approach, the research quantifies this transition by integrating spatial concentration metrics (HHI), advanced time-series modelling (OLS, ARIMA, ETS), and anomaly detection techniques to analyse loss patterns across the EU-27 from 1980 to 2023. The empirical results demonstrate three critical systemic dimensions: (1) a statistically significant upward shift in the baseline of economic damages; (2) a high geographical concentration of losses, with Germany, Italy, and France consistently bearing the largest share of climate-driven fiscal pressure; and (3) the emergence of volatility clustering, indicating that climate risks are becoming increasingly non-linear and embedded in the macroeconomic environment. The study contributes to the literature by reframing climate-related economic losses as a systemic fiscal phenomenon requiring structural governance reform, rather than ad hoc disaster response. The findings suggest that existing reactive policy frameworks are insufficient to address the scale of these structural risks. Consequently, the paper advocates for a paradigm shift in EU climate policy—moving toward anticipatory fiscal instruments, harmonised resilience financing, and monitoring systems designed to mitigate systemic volatility and cross-country economic asymmetry rather than merely responding to isolated disaster events.