Climate change increases physical climate uncertainty—the challenge of characterizing variations in Earth's climate system. This uncertainty has significant economic and policy implications, particularly at the local level. Granular measures are essential for two reasons: (1) they improve estimates of uncertainty’s economic impact, aiding resource allocation for climate mitigation, and (2) they identify localized risks, guiding adaptation efforts where needed most.

This policy brief presents “Local Physical Climate Uncertainty” (Cavaliere, et al., 2025), which constructs local uncertainty indexes using temperature data from 44 grid points across Italy. While focused on monthly temperature fluctuations, the methodology can be extended to other climate variables, such as rainfall, and applied at finer spatial resolutions (e.g., individual weather stations).

Findings show a marked increase in temperature uncertainty since the 1980s, particularly in coastal regions. A key application of these measures is estimating uncertainty’s effect on regional GDPs, highlighting its role in economic decision-making and climate adaptation policies.