The literature on the economic consequences of physical risk is growing, but there are still some challenges in linking this literature to the formulation of scenarios.14 For instance, extrapolating from the historical experience of sporadic extreme weather events may turn out to be misleading. Economic activity has tended to rebound quickly after sporadic extreme weather events in recent experience, often supported by significant reconstruction.
In contrast, climate change is an ongoing, cumulative process that could significantly increase the prevalence and severity of extreme events as well as contribute to chronic changes. These cumulative and chronic changes could have economic effects that differ substantively from the historic experience, for example, if they contribute to shifts in the location of economic activity or the sectoral composition within a region.