The Organisation for Economic Co-operation and Development (OECD) identifies the Autonomous Regions of the Azores and Madeira as “particularly vulnerable” to coastal erosion amid the escalating impacts of climate change in Portugal.

The warning appears in the OECD Economic Surveys: Portugal 2026, released in early January. The report stresses that the effects of a warmer and more unstable climate are likely to be territorially concentrated. While wildfires are expected to pose greater risks in Portugal’s northeastern and inland mainland regions, in the island territories, the primary threat highlighted is to the coastline.

In the chapter dedicated to decarbonization and adaptation, the report outlines a series of growing climate pressures: rising average temperatures, increasing water scarcity, salinization and erosion of coastal areas, and more frequent and intense extreme events such as wildfires, heat waves, and floods. The OECD argues that mitigation efforts must be accompanied by consistent adaptation policies tailored to “a warmer climate.”

The organization notes that these dynamics could carry high costs for individuals and businesses, including gradual economic adjustments. Among the potential impacts are the relocation of tourism-related activities in response to sea-level rise and coastal erosion, as well as changes in agricultural production due to new pest losses.

To frame these risks, the report draws on historical data regarding the human and economic toll of extreme weather and climate events. Citing the European Environment Agency (EEA), the OECD reports that between 1980 and 2023, Portugal recorded 10,339 deaths linked to such events and total economic losses of €16.671 billion (adjusted to 2023 prices). It also underscores the relatively small share of damages covered by insurance.

Although acknowledging the uncertainty inherent in long-term projections, the OECD points to forecasts suggesting substantial future damage. Under a continuation scenario, the wildfire season could lengthen by one month by 2040. Heat stress alone could reduce per capita GDP by 0.8 percent by 2050 and by 4.5 percent by 2100.

In response, the organization advocates proactive adaptation measures: reducing exposure, strengthening emergency preparedness, and adjusting business models. While implementing such policies would carry costs, the OECD argues that the benefits are likely to outweigh them.

As an example, the report cites estimates from Portugal’s 2024 National Adaptation Roadmap, which suggest that in a worst-case scenario, “optimal” adaptation measures could reduce economic damage by up to 1.4 percent of GDP by 2100, at a cost of 0.7 percent of GDP. In a more moderate scenario, damages could be reduced by 0.6 percent of GDP at a cost of 0.4 percent.

Still, the OECD highlights obstacles to implementation, particularly the need for “sufficient and predictable” financing and weaknesses in local-level coordination. Municipal and intermunicipal climate action plans — mandated under the 2021 Climate Law — are described as central tools for assessing risk and implementing measures. However, the report identifies gaps in coordination among municipalities and sectors, as well as unclear divisions of responsibility.

In coastal management specifically, the OECD warns that fragmented authority across multiple entities, including local governments, can result in inconsistent measures or even block necessary interventions.

Another key recommendation concerns financial risk. The OECD emphasizes that insurance coverage for climate-related risks remains low — only about 3 percent of losses between 1980 and 2024 were insured. It cautions that ad hoc public compensation may discourage private insurance uptake and create significant contingent liabilities. Among its proposed solutions is the establishment of a formal public-private risk-sharing mechanism, including the possibility of mandatory property insurance against natural disasters, with premiums aligned to levels of risk exposure.

In Diário dos Açores, Paulo Viveiros, director

Translated into English as a community outreach program by the Portuguese Beyond Borders Institute (PBBI) and the Modern and Classical Languages and Literatures Department (MCLL), in collaboration with Bruma Publication and ADMA (Azores-Diaspora Media Alliance) at California State University, Fresno. PBBI thanks Luso Financial for sponsoring NOVIDADES.