Climate change promotes energy and economic downturns: Equator-based evidence

This study examines the impact of climate change on energy intensity and its cascading effects on national economies. Climate change constrains energy consumption, thereby influencing Gross Domestic Product (GDP), particularly in equatorial nations where its effects on the energy sector and economy are more pronounced. Using a dataset of 1,612 observations from 1990Q1 to 2020Q4 across 13 equatorial countries, this research employs the Vector Autoregressive (VAR) model, particularly the Impulse Response Function (IRF), to assess climate change’s influence. Accordingly, the IRF is utilized to forecast the future trajectory of energy intensity and economic performance under worsening climate conditions. Findings indicate that natural disasters (-0.067), precipitation (-0.005), and rising temperatures (-0.317) significantly reduce energy intensity, ultimately disrupting economic stability. The analysis further reveals that these climate factors will continue to weaken energy intensity and economic growth over the next ten periods. To mitigate these risks, equatorial countries must adopt policies promoting sustainable energy and climate resilience. Governments should establish robust regulatory frameworks, enhance international collaboration, and share best practices to strengthen climate adaptation and mitigation efforts, ensuring economic stability and long-term sustainability.