① This paper examines the impact of climate change risk on Korea's real economy. The results show that climate change risk exerts a negative effect on the economy over a long period of time. The transition risk from carbon pricing policies increases up to 2050 and then subsides gradually. In contrast, the physical risk caused by climate change damage increases sharply toward 2100 if policy responses are absent or delayed.

② This paper suggests that an early implementation of greenhouse gas (GHG) emissions reduction policies would benefit the Korean economy in the long run. While the initial phase of GHG reduction policy implementation entails costs, it fosters technological development and reduces damage from climate change, thereby strengthening the economy's resilience. 

③ This paper further suggests the necessity of strengthening, as early as possible, efforts to develop and commercialize GHG reduction technology in industrial sectors, including manufacturing. Given the supply chains of industries in Korea, a carbon price increase shock does not solely impact carbon-intensive industries but can also spill over to other industries. Therefore, it is essential to accelerate investment in low-carbon technologies across all industries

④ This paper contributes to the literature on climate risk analysis because it: (1) measures and presents climate risk impacts by industry, unlike the NGFS (Network for Greening the Financial System) climate scenario; (2) presents climate change scenarios that reflect the economy and climate change characteristics of Korea, through cooperation of the Bank of Korea, Financial Supervisory Service, and Korea Meteorological Administration; and (3) clearly reflects the transmission channels of overseas climate risks to the domestic economy.The analysis will be used as building blocks for the climate stress tests currently being conducted jointly by the Bank of Korea, Financial Supervisory Service, and financial institutions in Korea.

⑤ Meanwhile, it should be noted that the impact of climate change on the real economy measured in this paper does not imply future projections of the Korean economy. The estimates pertain to the magnitude of the economic impact the Korean economy could face under the assumed transition risk and physical risk pathways. If the basic assumptions of variables such as climate variables change, the size of the impact would also vary.