PIK Study: Climate Action Opens New Economic Prospects – Fossil-Fuel States Face Challenges

Potsdam – A new study by the Potsdam Institute for Climate Impact Research (PIK) shows how climate action could affect the economic assets of 169 countries. While avoided climate damage and renewable energy offer economic benefits and new potential, 19 countries heavily dependent on fossil fuels could face economic disadvantages.

International energy policy remains strongly shaped by the availability and trade of oil, gas and coal. The expansion of renewable energy and growing electrification are changing these dependencies, and with them the economic interests of energy exporters and importing countries. This creates new challenges for international climate policy.

Renewable Energy and Avoided Climate Damage: Where Climate Action Offers the Greatest Potential

The research team led by PIK scientist Guanna Pan examined how different climate action strategies could affect the assets of 169 countries by the end of the century. The results were published in the journal Nature Sustainability.

The researchers assess four factors: avoided climate damage, solar and wind energy potential, land carbon sequestration, and possible value losses of fossil energy resources. Climate action scenarios of differing ambition are compared. The results are based on the evaluation of several model calculations in which the economic effects of climate action are set in relation to each country’s economic output. For renewable energy and carbon sequestration, the contribution to avoiding emissions is valued in monetary terms, rather than representing an economic gain actually realised.

On this basis, the research team identifies five groups of countries with similar economic interests. Three of them could benefit particularly strongly from ambitious climate policy. These include 51 countries, predominantly in the Global South, for which limiting global warming can avoid especially high economic climate damage.

A further 13 countries have particularly large renewable energy potential. According to PIK, most of these countries are in Africa, where solar energy in particular opens up new prospects. In addition, there are 17 countries with high land carbon sequestration capacity.

Together, these three country groups account for around 13 percent of current global economic output. Their potential benefits from climate action are particularly pronounced relative to their respective economic structures, while their weight in the global economy is limited.

19 Fossil-Fuel States: Economic Disadvantages from Declining Demand for Oil, Gas and Coal

The situation is different for 19 countries whose assets depend heavily on fossil energy resources. For these countries, ambitious climate policy can be associated with economic disadvantages. According to PIK, together they account for 6 percent of global economic output.

The faster global demand for fossil fuels falls, the more economically exploitable oil, gas and coal deposits can lose value. For the countries affected, this can create economic incentives to favour a slower international phase-out of fossil fuels.

On average, the study also finds the lowest level of climate policy ambition in this group of countries. However, the statistical analyses do not show a demonstrable link with economic assets for all of the climate policy indicators examined.

USA, China and Europe: Major Economies with Moderate Incentives for Climate Action

The largest share of the global economy is accounted for by a fifth group of countries. These 69 countries include the USA and China, among others; the researchers also place the EU in this group. Together, they represent 81 percent of global economic output.

For these economies, the study shows comparatively moderate effects on the assets examined relative to their economic output. According to PIK, the absolute economic benefits of climate action can nonetheless be substantial, particularly through avoided climate damage.

This presents a challenge for international climate policy: the major economies play a decisive role in global climate agreements. However, the economic benefits examined are smaller relative to their economic output than in the country groups with particularly high climate action potential. This may make it harder to agree on common climate targets.

Europe: Renewable Energy Can Reduce Fossil Import Dependence

Europe illustrates the economic significance that the transformation of energy supply can have. According to the European Commission, the European Union spent around EUR 340 billion on fossil energy imports in 2025. In 2024, the EU’s energy import dependency stood at 57 percent according to Eurostat data, and at around 67 percent in Germany.

The expansion of wind and solar energy, together with growing electrification of heating, transport and industry, can reduce Europe’s dependence on fossil energy imports. In the long term, this can lower not only CO₂ emissions but also spending on imported energy sources and vulnerability to international energy price fluctuations.

The differing economic interests complicate international climate negotiations. The research team therefore discusses economic package solutions, such as cooperation on trade, research and development, as well as financial transfers. These could create new incentives for stronger international cooperation on climate action.

Source: IWR Online, 16 Oct 2026