Effect of Climate Change on Geopolitical Risk: From 1994 to 2020

The escalating climate change poses numerous challenges for the world, encompassing various aspects such as resource scarcity, natural disasters, decreased grain production, as well as increased population displacement. These issues have the potential to reshape the global geopolitical pattern by triggering more international cooperation, competition, or conflict. The study explores the effect of climate change on geopolitical risk in 40 countries from 1994 to 2020, as well as the underlying mechanism. It also verifies the heterogeneous effect of climate change on geopolitical risk in different scenarios. The findings reveal several key conclusions: (1) Rising temperature significantly increases geopolitical risk, with 1% increase in temperature leading to an increase of 2.1% in geopolitical risk. In contrast, the precipitation, dew point, wind speed and sea level pressure do not demonstrate a significant relationship with geopolitical risk. (2) The positive correlation between temperature and geopolitical risk gradually weakens since 2004. (3) Rising temperature has a greater positive effect on geopolitical risk in under-developed countries or in arid regions. (4) The mechanism through which rising temperature affects geopolitical risk includes reductions in manufacturing growth, human development index, and wheat yields. This paper systematically scrutinizes contribution of climate change to geopolitical risk, highlighting the importance of mitigating climate change to reduce global geopolitical risk. JEL classification : R11; Q54; Q58