HOW FISCAL AUTONOMY SHAPES CLIMATE-RELATED ECONOMIC LOSSES IN EUROPE

Economic policy debates increasingly recognize the need to integrate climate re- silience into public finance and governance frameworks. As extreme weather events intensify across Europe, the economic costs of climate-related disasters have become a growing concern for policymakers. While national governments play a crucial role in climate adaptation, local authorities are often responsible for implementing risk prevention measures, managing emer- gency responses, and facilitating economic recovery. This raises important questions about the role of fiscal decentralization in shaping the effectiveness of disaster risk management and economic resilience. This study investigates whether and to what extent fiscal decentraliza- tion influences the economic costs of climate-related disasters in the European Union. Using a panel dataset covering 27 EU countries from 2009 to 2023, it provides empirical evidence that greater fiscal autonomy for subnational governments is associated with lower per cap- ita economic damages from extreme weather events. The results suggest that decentralization enhances local investment in risk prevention and climate adaptation, but its effectiveness de- pends on governance quality and institutional capacity. Integrating fiscal decentralization with climate resilience policies can help mitigate territorial disparities and strengthen economic re- silience. These insights are valuable for policymakers designing fiscal reforms to address envi- ronmental and economic vulnerabilities