Climate change, hurricanes, and sovereign debt in the Caribbean basin
Eduardo Cavallo, Santiago Gomez, Ilan Noy & Eric Strobl (07 Mar 2025): Climate change, hurricanes, and sovereign debt in the Caribbean basin, Climate and Development, DOI: 10.1080/17565529.2025.2475148
To link to this article: https://doi.org/10.1080/17565529.2025.2475148 (open access)
This research explores the relationship between climate change, hurricanes, and government debt in the Caribbean region. Caribbean countries frequently experience severe hurricanes, which scientists expect will worsen due to human-caused climate change. Because these nations already face high levels of debt, understanding the economic impact of these disasters is crucial.
The study analyzed data from hurricanes occurring between 1970 and 2020, assessing their effect on public debt. Researchers found that hurricanes significantly increase debt levels, as governments must borrow more to fund recovery and reconstruction efforts. Specifically, after the ten most intense hurricanes, countries' debt increased nearly 10% more than it would have without the storm. Three years after such hurricanes, debt levels were almost 18% higher compared to predicted debt without the hurricane.
Scientists attribute part of these impacts to human-caused climate change, particularly through increased rainfall intensity during hurricanes. Current climate change has likely led to at least a 10% increase in rainfall during these storms. This additional rainfall linked to climate change translates to about a 3.8% rise in debt levels following major hurricanes.
These findings underline the financial vulnerability of Caribbean countries to climate change, highlighting the need for international policies and financial support mechanisms to assist these nations in managing climate-related disasters.
