Economics of climate change and cost of inaction

The opportunity under the Horizon Europe program focuses on the economics of climate change and the costs associated with inaction, specifically under the call HORIZON-CL5-2026-07-D1-03. This funding initiative is intended to enhance understanding of the socio-economic impacts of climate change and is aligned with the goal of making robust, informed strategic decisions regarding climate action.

The call is currently open for applications, with the submission period commencing on December 18, 2025, and concluding on April 15, 2026. The total funding available for this specific topic is €16 million, allowing for approximately four grants of €4 million each.

Eligible applicant types include universities, research institutions, small and medium-sized enterprises, large enterprises, public bodies, and non-profit organizations from EU member states and associated countries. Projects are required to be part of a consortium with at least three independent legal entities from different nations, with an emphasis on international cooperation, particularly with low and lower-middle-income countries like China, India, Brazil, and Indonesia within the global analysis scope.

The funding mechanism of this opportunity is structured as a HORIZON Lump Sum Grant, which simplifies the funding process by providing fixed amounts rather than reimbursing costs. This approach is designed to minimize administrative burdens while maintaining accountability.

The primary aim of this research initiative is to address gaps in existing methodologies for assessing the socio-economic costs of climate inaction. Proposals must contribute to developing advanced models, methods, and tools that incorporate the latest scientific data, including assessments of the consequences of extreme events and ecosystem tipping points. The call encourages interdisciplinary collaboration and requires co-design processes with stakeholders to ensure that research findings are effectively implemented in policy and decision-making.

The evaluation of submitted projects will be conducted through a single-stage process, where proposals will face a rigorous admissibility check and eligibility assessment based on predefined criteria. Funding success is contingent upon meeting minimum thresholds in evaluation scores.

Overall, this funding opportunity seeks to stimulate research that provides critical insights into the economic implications of climate inaction, with an aim to bolster efforts towards creating a climate-neutral and resilient society. The expected outcomes include a robust understanding of the costs and benefits associated with climate action, contributing to evidence-based policy recommendations and fostering collaboration across research disciplines.

This EU funding opportunity, under the Horizon Europe program, call CLIMATE (HORIZON-CL5-2026-07), aims to advance the understanding of the economics of climate change and the costs of inaction. It falls under the "Advancing science for a fair transition to a climate-neutral and resilient society (2026-27)" destination, contributing to the Strategic Plan’s Key Strategic Orientations ‘Green transition’, ‘Digital transition’ and ‘A more resilient, competitive, inclusive and democratic Europe’. The call seeks to address the urgent need, as emphasized by the IPCC, to better understand the benefits and opportunities associated with deep, rapid, and sustained mitigation and accelerated adaptation action to inform strategic decisions.

The scope of the funding opportunity includes developing and enhancing models, methods, and tools to improve the understanding of future socio-economic costs of climate inaction, defined as insufficient or delayed action. This involves advancing novel approaches and frameworks to address limitations in existing methodologies, integrating the latest scientific evidence and diverse data sources, and applying them to various conditions and contexts. The call encourages leveraging emerging digital capabilities, including those developed under initiatives like Destination Earth.

Research should account for the full spectrum of climate impacts, such as those from extreme and low-probability high-impact events and the consequences of trespassing Earth system tipping points, to ensure more comprehensive and accurate assessments. Cascading and compound effects, as well as non-market impacts (e.g., health, biodiversity and ecosystems, migration), should be considered. Actions should also contribute to rethinking discount rates and damage functions to better reflect the long-term uncertainty of climate impacts and their implications.

The funding opportunity also aims to assess foregone co-benefits and missed opportunities of climate inaction, and their distribution, ranging from health-related gains to economic benefits like business and industrial opportunities, job creation, energy and economic security, innovation and lower costs, as well as environmental and social improvements such as from biodiversity conservation, and reduced inequalities. It also includes assessing increased adaptation needs and costs associated with inadequate mitigation, accelerated climate impacts, lost resilience, crossing of adaptation limits, as well as the impact on public budgets. The cost of climate inaction should be compared with the cost of ambitious mitigation and adaptation.

The call emphasizes the treatment of uncertainty, ethics, inequality, and justice in the economic analysis of climate change and encourages exploring approaches more compatible with planetary boundaries, going beyond traditional welfare and cost-effectiveness models.

Interdisciplinary collaboration between physical scientists, economists, and other relevant SSH (Social Sciences and Humanities) disciplines is required. Actions should include a process of co-design with stakeholders (e.g., representatives of governments, public administrations, such as civil protection competent authorities, or the private sector) to support uptake of the results.

Proposals are expected to address only one of the following priority areas:

Area A: Global

Analysis should be global in scale, providing regionally resolved insights to enable comparisons across world regions, distinguishing between developing and developed countries, and reflecting diverse circumstances and contexts. International cooperation is generally encouraged and specifically required with low and lower/upper-middle-income countries, particularly major GHG emitters such as China (contributing to the EU-China Climate Change and Biodiversity (CCB) flagship initiative), India, Brazil, and Indonesia. It should enable delivery of robust, representative, and widely accepted estimates, and support scientific capacity building where appropriate. The consortium must include as beneficiary or associated partner at least three independent legal entities established in three different low or lower/upper-middle-income countries.

Area B: The EU

Actions should focus on the EU, giving particular attention to consequences for EU industrial performance, security of supply, and strategic autonomy.

All projects funded under this topic are strongly encouraged to collaborate and envisage clustering activities together and with other relevant projects in and outside of Horizon Europe.

Expected outcomes of the projects include:

A more robust understanding of the costs of climate inaction and their distribution.
Greater consistency in how socio-economic and physical science disciplines address climate change.
Advanced knowledge on the interactions between climate change impacts, climate action, and global and regional economic performance.
More clarity on the implications of climate change and climate policies on European competitiveness, economic security, and strategic autonomy.
Best available evidence and policy recommendations made available in a timely manner to inform various agreements, assessments, plans, strategies, and initiatives.

The main impacts to be generated by topics under this Destination are:

Supporting climate action (both mitigation and adaptation) in Europe and globally.
Closing key knowledge gaps related to climate change.
Strengthening the European Research Area on climate change.
Maximising synergies between mitigation and adaptation and with other policy priorities.

The call specifies several general conditions, including admissibility conditions related to proposal page limits and layout, eligible countries (as described in Annex B of the Work Programme General Annexes and the Horizon Europe Programme Guide), and other eligible conditions such as the use of Copernicus and/or Galileo/EGNOS for projects using satellite-based data. Financial and operational capacity and exclusion criteria are described in Annex C of the Work Programme General Annexes.

The evaluation and award process will consider award criteria, scoring, and thresholds as described in Annex D of the Work Programme General Annexes. To ensure a balanced portfolio, grants will be awarded to applications not only in order of ranking but also to fund at least two highest ranked applications in each area (A and B), provided that the corresponding applications attain all thresholds. Submission and evaluation processes are described in Annex F of the Work Programme General Annexes and the Online Manual. The indicative timeline for evaluation and grant agreement is also described in Annex F.

Legal and financial aspects include additional obligations regarding open science practices, such as open access to new modules, models, or tools developed with EU funding. Eligible costs will take the form of a lump sum as defined in the Decision of 7 July 2021.

Application forms, evaluation forms, model grant agreements, and additional documents are available in the Submission System and through links provided in the call documentation.

The budget overview for the call in 2026 is as follows:

HORIZON-CL5-2026-07-D1-01: 15,000,000 EUR, indicative grant amount around 5,000,000 EUR, 3 grants
HORIZON-CL5-2026-07-D1-02: 15,000,000 EUR, indicative grant amount 4,000,000 to 5,000,000 EUR, 3 grants
HORIZON-CL5-2026-07-D1-03: 16,000,000 EUR, indicative grant amount around 4,000,000 EUR, 4 grants
HORIZON-CL5-2026-07-D1-04: 15,000,000 EUR, indicative grant amount 4,000,000 to 5,000,000 EUR, 3 grants
HORIZON-CL5-2026-07-D1-05: 21,000,000 EUR, indicative grant amount around 7,000,000 EUR, 3 grants

The opening date for submission is December 18, 2025, and the deadline is April 15, 2026, at 17:00:00 Brussels time.

This funding opportunity is designed to stimulate research and innovation that will provide a more comprehensive understanding of the economic implications of climate change and the costs associated with failing to take sufficient action. By enhancing models, methods, and tools, and by fostering interdisciplinary collaboration, the call aims to support decision-makers in designing and implementing effective climate mitigation and adaptation strategies, ultimately contributing to a climate-neutral, climate-resilient, and prosperous society. It encourages projects that not only assess the economic costs but also explore the ethical, social, and environmental dimensions of climate change, ensuring a fair and just transition for all.

Eligible Applicant Types: The eligible applicant types are not explicitly stated, but based on the context of Horizon Europe Research and Innovation Actions (RIA), eligible applicants can include universities, research institutes, SMEs, large enterprises, and other legal entities carrying out research and innovation activities. The call encourages interdisciplinary collaboration and co-design with stakeholders such as government representatives, public administrations, civil protection authorities, and private sector entities, suggesting a broad range of eligible participants.

Funding Type: The funding type is a grant, specifically a HORIZON Lump Sum Grant, which falls under the HORIZON Research and Innovation Actions (RIA).

Consortium Requirement: The opportunity requires a consortium of multiple applicants. For Area A (Global), the consortium must include as a beneficiary or associated partner at least three independent legal entities established in three different low or lower/upper-middle-income countries. The requirements for Area B (The EU) are not explicitly stated, but a consortium is implied.

Beneficiary Scope (Geographic Eligibility): The geographic eligibility varies depending on the priority area. Area A (Global) requires international cooperation with low and lower/upper-middle-income countries. Area B focuses on the EU. A number of non-EU/non-Associated Countries that are not automatically eligible for funding have made specific provisions for making funding available for their participants in Horizon Europe projects.

Target Sector: The program targets the climate, energy, and mobility sectors, with a focus on the economics of climate change and the costs of inaction. It also involves interdisciplinary collaboration between physical scientists, economists, and other relevant Social Sciences and Humanities (SSH) disciplines.

Mentioned Countries: China, India, Brazil, Indonesia, EU.

Project Stage: The expected maturity of the project is research and innovation actions, which suggests projects in the research, development, and validation stages.

Funding Amount: The funding amounts vary depending on the specific topic within the call:
HORIZON-CL5-2026-07-D1-01: around €5,000,000 (3 grants)
HORIZON-CL5-2026-07-D1-02: €4,000,000 to €5,000,000 (3 grants)
HORIZON-CL5-2026-07-D1-03: around €4,000,000 (4 grants)
HORIZON-CL5-2026-07-D1-04: €4,000,000 to €5,000,000 (3 grants)
HORIZON-CL5-2026-07-D1-05: around €7,000,000 (3 grants)

Application Type: The application type is an open call with a single-stage submission process.

Nature of Support: Beneficiaries will receive money in the form of a lump sum grant.

Application Stages: The application process involves a single stage.

Success Rates: The success rates are not explicitly mentioned, but the indicative number of grants for each topic provides some insight into the potential success rate.

Co-funding Requirement: The information does not explicitly state whether co-funding is required.

Summary: This Horizon Europe call focuses on the economics of climate change and the cost of inaction. It aims to enhance the understanding of socio-economic impacts, improve assessment methodologies, and develop tools for strategic decision-making related to climate action. The call is structured around two main priority areas: a global analysis and an EU-focused analysis. The global analysis encourages international cooperation, particularly with low and lower/upper-middle-income countries and major GHG emitters like China, India, Brazil, and Indonesia. The EU-focused analysis aims to address the consequences for EU industrial performance, security of supply, and strategic autonomy. The call encourages interdisciplinary collaboration and co-design with stakeholders to ensure the uptake of research results. Funding is provided as a lump sum grant, and applications are submitted through a single-stage process. The call seeks to contribute to the "Advancing science for a transition to a climate-neutral and resilient society" objective of the Horizon Europe Strategic Plan.