Heterogeneous Impacts of Climate Change on Economic Growth in Emerging Seven Countries: A Novel Climate Change Index

ABSTRACT Climate change stands out as a global threat, particularly to developing economies. This study aims to analyse the effects of climate change on economic growth specifically for the Emerging Seven (E7) countries over the period 1995–2021 using a novel Climate Change Index (CCI) that integrates causes and consequences. The CCI is constructed via principal component analysis from temperature and precipitation volatility and CO 2 emissions. To account for the heterogeneity, the Method of Moments Quantile Regression (MMQR) is used, and the robustness of the findings is tested using the Driscoll–Kraay estimator. Gross Capital Formation, Labour Force and Financial Development Index are included in the model as control variables. Empirical findings indicate that higher CCI values significantly depress GDP growth, whereas all control variables are growth‐enhancing. The results highlight the necessity of developing climate‐resilient sustainable growth strategies in the E7 countries.