Japan’s auction of 30-year sovereign notes Thursday is shaping up as a barometer of policymakers’ success in quelling debt-market turmoil that pushed yields on the nation’s super-long bonds to record highs in May.
Yields have stepped down from their peaks, helped by the Ministry of Finance adjusting issuance to sell fewer super-long bonds, and by the Bank of Japan slowing its pullback from debt purchases. Recent sales of shorter-maturity securities have also gone smoothly.
SHANGHAI, July 2, 2025 /PRNewswire/ — Dizal (SSE:688192), a biopharmaceutical company committed to developing novel medicines for the treatment of cancer and immunological diseases, announced today that the U.S. Food and Drug Administration (FDA) has approved ZEGFROVY® (sunvozertinib) for the treatment of adult patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) with epidermal growth factor receptor (EGFR) exon 20 insertion mutations (exon20ins), as detected by an FDA-approved test, whose disease has progressed on or after platinum-based chemotherapy.
ZEGFROVY, which has received Priority Review and Breakthrough Therapy Designation from the FDA, is the only approved targeted oral treatment for NSCLC with EGFR exon20ins. This indication is approved under Accelerated Approval based on overall response rate and duration of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial.
“We are proud to have developed ZEGFROVY, a first-in-class oral therapy that offers a more effective treatment option with enhanced safety and ease of administration for NSCLC patients with EGFR exon20ins,” said Dr. Xiaolin Zhang, CEO of Dizal. “The accelerated approval of ZEGFROVY marks a significant milestone that underscores our commitment to developing groundbreaking new medicines for patients with high unmet medical needs around the world.”
ZEGFROVY is an oral, irreversible EGFR inhibitor with uniquely designed molecular structure targeting a wide spectrum of EGFR mutations with wild-type EGFR selectivity. In August 2023, ZEGFROVY received accelerated approval in China. Today’s FDA approval follows Breakthrough Therapy Designation and Priority Review granted by both the U.S. FDA and the Center for Drug Evaluation (CDE) of China’s National Medical Products Administration (NMPA).
The FDA approval is supported by data from the multinational pivotal study WU-KONG1 Part B (WU-KONG1B), aiming to investigate the efficacy and safety of ZEGFROVY in relapsed or refractory NSCLC with EGFR exon20ins. The study results were featured as an oral presentation at the 2024 American Society of Clinical Oncology (ASCO) Annual Meeting and were recently published in the Journal of Clinical Oncology.
“As the world’s only approved targeted oral therapy for EGFR exon20ins NSCLC, ZEGFROVY has expanded the treatment paradigm in this therapeutic area that has long lacked convenient and effective treatment options,” said Pasi A. Jänne, MD, PhD, Dana-Farber Cancer Institute of Harvard Medical School and lead principal investigator of WU-KONG1B. “Research findings from WU-KONG1B have demonstrated ZEGFROVY’s significant therapeutic effects with consistent efficacy across both Asian and non-Asian patient populations. Its convenient once-daily oral dosing substantially improves administration convenience and patient adherence, which is an increasingly critical factor as lung cancer care shifts toward chronic disease management. The U.S. approval of ZEGFROVY® marks a landmark in scientific advancement and represents a meaningful milestone in addressing the long-standing unmet medical needs of this underserved patient population.”
“ZEGFROVY has demonstrated breakthrough therapeutic value in the treatment of EGFR exon20ins NSCLC, as shown in a rigorous multinational clinical trial. Its potent antitumor activity, manageable safety profile, and convenient oral administration position it as an optimal treatment option in clinical practice,” said Prof. James Chih-Hsin Yang, MD, PhD, National Taiwan University Cancer Center Hospital and the Co-lead principal investigator of WU-KONG1B. “The approval of ZEGFROVY in major global markets not only offers new hope for patients, but also reinforces our commitment to patient-centered research and the continued advancement of precision medicine in lung cancer.”
“In NSCLC, EGFR exon20ins represent the third most common type of EGFR mutation. EGFR exon20ins are particularly challenging to treat due to their unique spatial conformation, diverse mutation subtypes, and high heterogeneity. As a result, patients face a poor prognosis and limited treatment options,” said Prof. Mengzhao Wang, MD, PhD, lead principal investigator of the China-based pivotal study WU-KONG6 of ZEGFROVY and principal investigator of WU-KONG1B at Peking Union Medical College Hospital, “The results of the WU-KONG6 study demonstrated ZEGFROVY’s clinical benefit superior to current options and lead to the drug’s approval in China. The U.S. approval of ZEGFROVY will enable more patients around the world to benefit from this drug.”
The FDA simultaneously approved Thermo Fisher Scientific’s Oncomine™ Dx Express Test as a next-generation sequencing (NGS) companion diagnostic (CDx) for ZEGFROVY to identify NSCLC patients with EGFR Exon20 insertions. NGS testing is recognized as a critical technology in cancer genomic profiling, facilitating the rapid and precise detection of DNA mutations in tumor cells. Combined with the Ion Torrent™ Genexus™ Dx System, the test delivers NGS results in as little as 24 hours to help inform more timely treatment decisions in patients with EGFR exon20ins NSCLC.
Additionally, Dizal has completed enrollment for its multinational phase III pivotal WU-KONG28 study, evaluating ZEGFROVY versus platinum-based doublet chemotherapies in treatment naïve NSCLC patients with EGFR exon20ins across 16 countries and regions. At the 2023 European Society for Medical Oncology (ESMO) Annual Meeting, Dizal reported that ZEGFROVY, as a single oral agent, achieved a confirmed objective response rate (ORR) of 78.6% and a median progression-free survival (mPFS) of 12.4 months in the first-line setting. With its potent antitumor activity and favorable safety profile, ZEGFROVY demonstrated strong potential as an optimal first-line treatment for patients with EGFR exon20ins NSCLC.
About ZEGFROVY® (sunvozertinib)
ZEGFROVY is an irreversible EGFR inhibitor discovered by Dizal scientists targeting a wide spectrum of EGFR mutations with wild-type EGFR selectivity. ZEGFROVY is approved in the U.S. and China for the treatment the treatment of adult patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) with epidermal growth factor receptor (EGFR) exon 20 insertion mutations (exon20ins), whose disease has progressed on or after platinum-based chemotherapy. The China approval is based on the results of the pivotal WU-KONG6 study in platinum-based chemotherapy pretreated NSCLC with EGFR exon20ins. The U.S. approval is supported by WU-KONG1 Part B, a multinational pivotal study investigating the efficacy and safety of ZEGFROVY in the same indication.
In addition, ZEGFROVY also demonstrated encouraging anti-tumor activity in NSCLC patients with EGFR sensitizing, T790M, and uncommon mutations (such as G719X, L861Q, etc.), as well as HER2 exon20ins.
ZEGFROVY showed a well-tolerated and manageable safety profile in the clinic. The most common drug-related TEAEs (treatment-emergent adverse event) were Grade 1/2 in nature and clinically manageable.
WU-KONG28, a phase III, multinational, randomized study assessing ZEGFROVY as a first-line treatment for patients with EGFR exon20ins NSCLC, has completed enrollment across 16 countries and regions.
Pre-clinical and clinical results of ZEGFROVY were published in peer-reviewed journals Cancer Discovery, The Lancet Respiratory Medicine and Journal of Clinical Oncology.
About Dizal
Dizal is a biopharmaceutical company, dedicated to the discovery, development and commercialization of differentiated therapeutics for the treatment of cancer and immunological diseases. The company aims to develop first-in-class and groundbreaking new medicines, and further address unmet medical needs worldwide. Deep-rooted in translational science and molecular design, it has established an internationally competitive portfolio with multiple assets in global pivotal studies and two leading assets: ZEGFROVY, approved in both the U.S. and China, and golidocitinib, approved in China. To learn more about Dizal, please visit www.dizalpharma.com, or follow us on Linkedin or Twitter.
Forward-Looking Statements
This news release may contain certain forward-looking statements that are, by their nature, subject to significant risks and uncertainties. The words “anticipate”, “believe”, “estimate”, “expect”, and “intend” and similar expressions, as they relate to Dizal, are intended to identify certain forward-looking statements. Dizal does not intend to update these forward-looking statements regularly.
These forward-looking statements are based on the existing beliefs, assumptions, expectations, estimates, projections, and understandings of the management of Dizal with respect to future events at the time these statements are made. These statements are not a guarantee of future developments and are subject to risks, uncertainties, and other factors, some of which are beyond Dizal’s control and are difficult to predict. Consequently, actual results may differ materially from information contained in the forward-looking statements as a result of future changes or developments in our business, Dizal’s competitive environment, and political, economic, legal, and social conditions.
Dizal, the Directors, and the employees of Dizal assume (a) no obligation to correct or update the forward-looking statements contained on this site; and (b) no liability in the event that any of the forward-looking statements does not materialize or turnout to be incorrect.
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SOURCE Dizal Pharmaceutical
Some countries have increased coal use not just because coal is “cheap” (“Why the world is not quitting coal”, The Big Read, June 18), but because coal is backed by state interests that continue to protect, subsidise and promote its use.
In China, coal-heavy regions including Inner Mongolia and Xinjiang offer guaranteed annual operating hours for coal plants, securing a steady revenue stream and economic base. This policy has helped drive a surge in new coal plant permits and construction, largely pushed by state-backed coal mining interests. In India, government policy has long supported coal use through long-term power purchase agreements with fixed payments and artificially low prices for domestic coal, helping shield coal power from competition. Long-term capacity payments for new coal plants in neighbouring Pakistan and Bangladesh have driven power prices so high that broad swaths of the population are installing solar panels for some economic relief.
In the US, uneconomic dispatch — that is, using coal power when cheaper options are available — has cost ratepayers an estimated $2bn annually in higher energy costs.
The Trump administration is expanding this approach by forcing an ageing Michigan coal-fired power plant to stay online despite assessments by the grid operator, the utility and the state authorities that the plant is not needed.
In Brazil, coal powers less than 2 per cent of the country’s electricity supply, yet Brazil’s Congress, the legislative branch of the federal government, is currently debating extending $16bn worth of subsidies through to 2050 for just two coal plants, propping up their continued use.
Coal persists not because it is cheap, but because its real price is hidden — passed on from protected coal interests to the public through subsidies, higher energy bills and public debt.
Re-evaluating these long-standing coal subsidies could help the world finally quit coal.
Christine Shearer
Project Manager, Global Coal Plant Tracker, Global Energy Monitor, Covina, CA, US
Microsoft has confirmed that it will lay-off as many as 9,000 workers, in the tech giant’s latest wave of job cuts this year.
The company said several divisions would be affected without specifying which ones but reports suggest that its Xbox video gaming unit will be hit.
Microsoft has set out plans to invest heavily in artificial intelligence (AI), and is spending $80bn (£68.6bn) in huge datacenters to train AI models
A spokesperson for the firm told the BBC: “We continue to implement organisational changes necessary to best position the company for success in a dynamic marketplace.”
The cuts would equate to 4% of Microsoft’s 228,000 global workforce.
It has initiated three other rounds of redundancies so far in 2025, including in May when it said it would axe 6,000 roles.
A database maintained by the Washington state shows more than 800 of the positions eliminated will be concentrated in Redmond as well as in Bellevue, another hub that Microsoft maintains in its home state.
In recent years, along with its counterparts in Big Tech, Microsoft has pivoted its attention towards the develop of AI, including investing in datacentres and chips.
Last year, the firm hired British AI pioneer Mustafa Suleyman to lead its new Microsoft AI division.
A top Microsoft executive recently told the BBC that the next half century will “fundamentally be defined by artificial intelligence,” changing the way we work and interact with one another.
Microsoft is also a major investor and shareholder in OpenAI, the company behind the popular chatbot ChatGPT, although the relationship has reportedly grown tense in recent months.
Hyundai has also released the first teaser film of IONIQ 6 N via the Hyundai N Worldwide YouTube channel, offering a striking cinematic glimpse of the car’s dynamic silhouette in action on the track.
Recently unveiled teaser images show a high-performance sedan profile, engineered for high-speed stability through intensive aerodynamic development. Flared fenders, a wider stance, lightweight wheels and a motorsport-inspired swan-neck rear spoiler all emphasize IONIQ 6 N’s focus on aerodynamic efficiency and dynamic capability.
IONIQ 6 N will make its public debut at the 2025 Goodwood Festival of Speed, where the Hyundai N brand will present a lineup of performance vehicles within a dedicated brand booth. The N Booth will feature interactive public activations, including race simulators and photo booths. Visitors who complete all N Booth activities will receive exclusive access to N’s grandstand, offering exclusive views of the iconic hill climb.
(Bloomberg) — Asian shares inched higher in the leadup to US jobs data, after US stocks hit another record following Donald Trump’s announcement of a trade deal with Vietnam.
A regional equity gauge opened up 0.2% after the S&P 500 closed at another record high Wednesday. News of a trade deal supported apparel stocks including Nike Inc. amid hopes the latest accord will avert a potential supply-chain catastrophe. The dollar held its losses, hovering around three-year lows.
Treasuries edged up modestly in early Asian trading Thursday after yields rose in the prior session following heavy selling in the UK, where concerns about Chancellor of the Exchequer Rachel Reeves’ future reignited questions over the nation’s fiscal position. In Japan, 10-year bonds declined ahead of a closely watched auction of 30-year sovereign notes at 12:35 p.m. in Tokyo.
The cross-asset moves underscored cautious optimism as traders contend with pockets of uncertainty ahead of jobs data that will help identify the path ahead for interest rates. Like in the UK, investors have raised concerns in the US, where Trump’s signature economic legislation stalled in the House Wednesday afternoon as Republican fiscal conservatives delayed a key procedural vote.
On the Vietnam trade deal, Trump said he reached a deal with the country after weeks of negotiations. A 20% tariff will be placed on Vietnamese exports to the US, with a 40% levy on any goods deemed to be transshipped through the country. Trump said that Vietnam had agreed to drop all levies on US imports.
Markets Live Strategist Mary Nicola says:
The deal also includes a 40% duty on transshipped goods, a clause clearly aimed at Chinese exports. Details on enforcement remain scarce, but this heightens risks of a potential response from Beijing.
Meanwhile, UK Prime Minister Keir Starmer said Rachel Reeves will stay on as Chancellor of the Exchequer, as he sought to draw a line under speculation about her future that sparked the bond selloff.
Back in the US, monthly nonfarm payroll data due later Thursday — a day earlier than usual due to a holiday — will show slower hiring and the highest unemployment rate since 2021 as the Trump administration’s trade and immigration policy shifts start to leave an imprint.
Separate private payrolls data from ADP Research on Wednesday showed employment at US companies fell for the first time in over two years. Despite signs of a downshift, Federal Reserve Chair Jerome Powell has repeated the labor market remains solid. Policymakers have refrained from lowering interest rates this year as they wait to see the impact of tariffs on inflation.
“One of the reasons the Fed has been able to be patient before cutting rates was because the job market was holding up so well, so if that were to change, then the Fed may be forced to move earlier than they would like,” said Chris Zaccarelli at Northlight Asset Management.
Following ADP Research’s private payrolls data, traders added to wagers on at least two rate reductions this year, with the first coming in September. If the upcoming jobs report shows further weakness, traders reckon the Fed could move up cuts.
Some of the main moves in markets:
Stocks
Currencies
Cryptocurrencies
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
©2025 Bloomberg L.P.
Technology reporters
Brittany WatsonMeta blamed a “technical error” when, last week, it admitted wrongly suspending some Facebook Groups.
Since then, users of the world’s most popular social media platform have got in touch with the BBC to say how, for them, it is much more than a technical issue.
Some say they have been shut out of pages that are key to their working lives, while others highlight the digital connections to loved ones that have been cut.
As well as anger, there is frustration that – despite Meta saying it is fixing the problem – there is often no human to speak to about an issue they suspect is caused by moderation decisions powered by artificial intelligence (AI).
They have also described how Instagram accounts have been affected, despite Meta saying it does not have evidence of a problem on its platforms more widely.
However, more than 25,000 people have signed a petition in the last few weeks which says the problem is being experienced across Facebook, Instagram, and WhatsApp.
Reddit forums are dedicated to the subject, many users are posting on social media about being banned by Meta, and some say they plan on taking a class action lawsuit against the social media giant.
Here’s what people have told the BBC about what it means to them to be locked out of their social media accounts.
The online petition about this issue was started by Brittany Watson, a 32-year-old from Ontario, in Canada.
She decided to act after her Facebook account was disabled for nine days in May before it was reinstated. She claims her page was cancelled over “account integrity”, and Meta has not provided her with any answers as to why.
“Facebook wasn’t just an app for me,” she told BBC News. “It was where I kept years of memories, connected with family and friends, followed pages that brought me joy, and found support communities for mental health.”
Getty ImagesWhen her account was banned, Brittany said she felt “ashamed, embarrassed and anxiety-stricken”.
“The weight of feeling exiled from everyone takes a pretty strong hold on you,” she added.
She quickly discovered she wasn’t the only one affected – thousands have signed the petition she started.
“There is a problem – it is personal accounts, it is business accounts, Facebook pages and Groups. I can’t believe they [Meta] are only saying it is just Groups.”
Meta has told BBC News that it takes action on accounts that violate our policies, and “people can appeal if they think we’ve made a mistake”.
It has also outlined in detail how it moderates accounts using a combination of people and technology to find and remove accounts that broke its rules.
It says it is not aware of a spike in erroneous account suspension.
John DaleAnother user who recently lost access to his Facebook account is John Dale, a former journalist who runs a local news group in West London with over 5,000 members.
His account was first suspended on 30 May for breaking community standards, and the page he administers has briefly come back twice since then.
He has no idea why.
As he was the only administrator of the group, he currently cannot approve new posts. Additionally, his own posts have been removed from the group.
“It’s frozen in time, [while] quite a lot of material has been deleted,” he told BBC News.
Mr Dale is appealing his suspension, but if he loses his appeal his account will be permanently deleted. He says he has received limited information on why he was banned.
“There is no customer service,” he said.
Michelle DeMaloMichelle DeMalo, who is also from Canada, says she has suffered financially since her Facebook and Instagram accounts were suspended in the middle of June. They were reinstated on Wednesday, a day after the BBC contacted Meta about her case.
She runs several pages, with some associated with her businesses in digital marketing, and also uses Facebook Marketplace to buy and sell goods.
All her accounts are linked, so when her personal Instagram page was suspended for “violating the terms” of a Meta policy, it triggered all of her pages to be suspended.
“My income’s taken a huge hit in the past couple of weeks,” she told BBC News from her home in Niagara Falls.
“People think I blocked them or think something happened to me.”
Michelle can’t think of anything which triggered the suspension, and was worried about the reputational hit as some of her clients can no longer contact her.
She struggled to find a Meta employee to take up her case with.
“There’s no customer service. There’s no human being you can talk to.”
Another person left frustrated at Meta’s moderation policies and its appeal process is Sam Tall, a 21-year-old from Bournemouth.
He told BBC News that he discovered his Instagram page was suspended last week for breaching “community standards”.
He decided to appeal, and it was rejected two minutes later – making Sam suspect the process was entirely handled by AI.
“There is absolutely no way that was seen by a human,” he told BBC News.
“All the memories, all my friends who I can no longer talk to because I don’t have them on any other platform – gone”.
As his Facebook account was linked, that was removed too.
“No explanation. I’m a bit baffled, to be honest.”
Sam says it is time for some serious action from Meta – and not just for his sake.
“If I know it is quite a few people, then there is a chance of Meta waking up and realising ‘oh, this actually is an issue – let’s reinstate them all.’”
One effect of climate change is an increase in global temperatures driven by rising carbon emissions. This trend imposes direct productivity losses on firms, as extreme heat reduces worker efficiency, raises absenteeism, and impairs machinery performance (Heal and Park 2016, Seppänen et al. 2006, Somanathan et al. 2021). While these direct effects are substantial, there are indirect effects which are equally important but often overlooked. These indirect effects come from the limited ability of firms to adjust inputs efficiently in response to climate shocks. Firm-level frictions, such as high adjustment costs, financial constraints and the inability to substitute labour for capital, can severely restrict this flexibility. For instance, when firms face barriers to scaling down capital inputs, they are forced to keep excess capital during periods of reduced activity. This diminishes its marginal productivity due to decreasing returns. To illustrate how such frictions turn into productivity losses, consider the example of an extreme temperature event that affects half of a country, causing firms there to be non-operational for 20% of the time, resulting in a 20% drop in their output. In a frictionless economy where it costs firms nothing to adjust inputs and firms can operate under constant returns to scale, aggregate productivity would stay the same, as inputs and outputs contract to the same extent. However, if unaffected firms can increase production while affected firms are unable to adjust their input use, the economy experiences a misallocation of resources. The result is a decline in aggregate productivity owing to an indirect effect (i.e. inputs are inefficiently assigned across firms).
In the above scenario, this decline would be roughly 10%. The example highlights how firm-level frictions can magnify the overall economic consequences of climate shocks. This is also important for integrated assessment models, which often abstract from microeconomic detail, potentially underestimating the true economic costs of climate change.
In our recent paper (Caggese et al. 2025), we examined both the direct and indirect effects of extreme temperatures on firm performance. We achieved this by combining detailed microdata on Italian firms with high-resolution temperature records from the EU’s Copernicus E-OBS dataset. Italy’s diverse climatic and economic geography – spanning Alpine industrial hubs in the north to the warmer, less-industrialised regions in the south – provides an ideal natural laboratory for studying the economic consequences of temperature variation. Panel a of Figure 1 illustrates how average maximum temperatures have evolved across Italy, revealing both significant year-on-year volatility and a clear upward trend. Panel b of Figure 1 displays the geographical distribution of average annual temperatures in 1999 across very detailed geographic units using the Nomenclature of Territorial Units for Statistics (NUTS), the EU system for subdividing countries into regions for statistical purposes. The wide range of average temperatures, from 0.14°C to 23.82°C, highlights the large differences between regions and confirms how suitable Italy is for the analysis.
Figure 1 Temperature in Italy
Our analysis uncovers a significant direct effect of extreme heat on firm performance. Episodes of very high temperatures reduce sales by approximately 0.8%, with each additional day above 40°C equivalent to nearly two days of lost sales. In response to these conditions, firms substantially reduce labour and material inputs but notably do not adjust their capital usage (Figure 2, panel a). This rigidity is likely driven by high adjustment costs and other firm-level frictions, leading to an inefficient allocation of capital and a decline in its marginal productivity. For example, we find that a factory significantly scales back its production activity during periods of extreme heat. To cope with this reduced output, it cuts down on workers’ shifts and temporarily reduces raw material purchases. However, its machinery, cooling systems and physical infrastructure remain unchanged. These capital assets are costly to adjust or relocate, so they sit underused. As a result, the factory’s capital is not being deployed efficiently and the return on that investment – its marginal productivity – declines. To illustrate how this inability to reallocate capital contributes to productivity losses, panel b of Figure 2 shows the effect of temperature on the marginal product of different inputs. In a frictionless setting, aggregate productivity rises as inputs flow to firms that can use them the most efficiently, i.e. firms with the highest marginal returns. We also find that the marginal productivity of labour and materials remains relatively stable, reflecting the ability of firms to adjust these inputs flexibly. In contrast, the marginal productivity of capital declines sharply at high temperatures, indicating that firms are unable to shed excess capital when it becomes unproductive. We refer to these inefficiencies in capital use and the associated productivity losses as the indirect effects of temperature shocks.
Figure 2 The effect of temperature on firm outcomes and marginal returns
To quantify the aggregate implications of these micro-level direct and indirect effects, we have developed a model that maps estimated firm-level semi-elasticities of sales and input use to temperature changes. To estimate how climate change affects overall productivity, we need to consider three main factors: how firm productivity responds to temperature; how firms’ use of inputs like labour and materials changes with temperature; and how temperatures are expected to change. We use our empirical results to quantify the first two factors, and we compute counterfactual scenarios of potential temperature increases. This framework allows us to break down aggregate productivity effects into two components: changes driven by efficiency losses within firms, and changes arising from misallocation across firms. Our new approach reveals differences compared with previous research. Under a moderate scenario involving a 2°C increase in average annual temperatures, our model predicts a 1.68% decline in aggregate productivity. This decline is more than four times the 0.39% loss that is estimated using a naïve approach, which is a basic method that averages firm-level effects without considering economics factors like allocative distortions. These effects become even more pronounced under an increase of 4°C, with productivity losses rising to approximately 6.81%, which emphasises how climate shocks can have complex effects that can intensify existing problems (Figure 3).
Figure 3 Aggregate productivity losses under different temperature change scenarios
We conclude by examining two scenarios that could either amplify or mitigate the effects of climate change. First, we assess the role of firm-level adaptation. By comparing regions with a long history of exposure to extreme temperatures – where firms are more likely to have already adopted climate resilient technologies – with regions that have only recently started to experience such temperatures, we find evidence that adaptation can substantially reduce the economic impact of heat shocks. Specifically, the use of climate-mitigating technologies lowers estimated damages by 20-30%. Second, we construct aggregate damage functions at the NUTS 3 level to evaluate the regional distribution of climate-induced productivity losses across Italian provinces. This geographical analysis reveals considerable variation, with effects ranging from mildly positive to severely negative (Figure 4, panel a). Notably, provinces with lower GDP per capita are projected to experience greater temperature increases, suggesting that climate change is likely to make existing regional disparities worse. Panel b of Figure 4 plots projected productivity losses against regional GDP per capita, revealing that wealthier regions tend to incur smaller productivity losses, while poorer regions are more severely affected.
Figure 4 Regional productivity losses in a scenario of a 2ºC increase in temperature
Our findings provide two key policy insights. First, the economic impact of climate-induced productivity shocks is substantially larger when accounting for the fact that labour, material inputs, and especially capital are relatively difficult to adjust. Policies that alleviate these constraints, such as promoting investment in adaptive technologies, can play a critical role in mitigating the economic costs of climate extremes (e.g. Carleton et al. 2025). Second, our analysis emphasises the risk that climate change may make existing regional inequalities worse. The analysis highlights the need for adaptation strategies that are targeted and region specific.
More broadly, our framework demonstrates the importance of incorporating detailed firm-level dynamics into integrated assessment models to more accurately estimate the economic costs of climate change. Future modelling efforts and policy assessments must go beyond aggregated damage estimates to explicitly account for microeconomic frictions. This approach will provide a more realistic picture of economic risks related to climate change and will support the development of adaptation and mitigation policies that are more effective and targeted.
Finally, our analysis shows that firm-level responses to extreme temperatures – particularly rigidities in adjusting capital and other inputs – can significantly amplify the aggregate productivity losses from climate change. These losses have broader macroeconomic implications; reduced productivity and output can constrain supply, while climate-induced disruptions to inputs like energy and materials can fuel inflationary pressures. Understanding these microeconomic channels is crucial for anticipating the inflationary impact of climate shocks and for designing policies that enhance firms’ resilience, support productive investment and safeguard economic stability in a warming world.
Authors’ Note: This column first appeared as a Research Bulletin of the European Central Bank. The authors gratefully acknowledge the comments from Catriona Layfield, Alex Popov, and Zoë Sprokel. The views expressed here are those of the author and do not necessarily represent the views of the European Central Bank or the Eurosystem.
Caggese, A, A Chiavari, S Goraya and C Villegas-Sanchez (2024), “Climate Change, Firms and Aggregate Productivity”, CEPR Discussion Paper No. 19164.
Carleton, T, E Duflo, K Jack G Zappalà (2025), “The economics of climate adaptation: From academic insights to effective policy”, VoxEU.org, 15 April.
Heal, G and J Park (2016), “Reflections – temperature stress and the direct impact of climate change: a review of an emerging literature”, Review of Environmental Economics and Policy 10(6): 347-362.
Nordhaus, W D (1977), “Economic growth and climate: the carbon dioxide problem”, American Economic Review 67(1): 341-346.
Seppänen, O, W J Fisk and Q Lei (2006), Room temperature and productivity in office work, Technical report, Helsinki University of Technology and Lawrence Berkeley National Laboratory.
Somanathan, E, R Somanathan, A Sudarshan and M Tewari (2021), “The impact of temperature on productivity and labor supply: evidence from Indian manufacturing”, Journal of Political Economy 129(6): 1797-1827.
