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Climate Change Feedback on Economic Growth: Explorations with a Dynamic General Equilibrium Model
Abstract
Human-generated greenhouse gases depend on the level of economic activity. Therefore, most climate change studies are based on models and scenarios of economic growth. Economic growth itself, however, is likely to be affected by climate change impacts. These impacts affect the economy in multiple and complex ways: changes in productivity, resource endowments, production and consumption patterns. We use a new dynamic, multi-regional Computable General Equilibrium (CGE) model of the world economy to answer the following questions: Will climate change impacts significantly affect growth and wealth distribution in the world? Should forecasts of human-induced greenhouse gases emissions be revised, once climate change impacts are taken into account? We found that, even though economic growth and emission paths do not change significantly at the global level, relevant differences exist at the regional and sectoral level. In particular, developing countries appear to suffer the most from climate change impacts.
... Then there are threats of natural disasters like cyclones and storm surges IPCC, 2014), which had cost in the range of 0.1%e0.9% of GDP per annum during 1990e2018. It also fell heavily on the low-income developing countries, and the number of deaths due to disasters has also been higher each year in developing nations (IMF, 2019;Abeygunawardena et al., 2009;Eboli et al., 2010). Such disasters hamper economic growth and exacerbate poverty (Abeygunawardena et al., 2009;Farid et al., 2016). ...
... With the proximity to the equator; sea levels rising threats to small island countries and have limited readiness to leverage adaptation, therefore on social justice grounds and following their common but differentiated responsibilities and respective capabilities, developed countries are now expected to help developing countries financially in mitigation and adaptation activities (Farid et al., 2016). Eboli et al. (2010) estimates that developed nations like Russia, Europe, and Japan will tend to moderately gaining in terms of real potential GDP in the range of 1.2%e2.4% by the end of the century, while on the other hand, countries of East Asia will be down by as much as 12.6% and 10.3% for the Middle East and North Africa. This difference is attributed to labour productivitydimpacted by human health and hot and humid conditionsdwhich is the more significant cause of the projected global damage hinging greatly on East Asia, the Middle East, and North Africa. ...
... This difference is attributed to labour productivitydimpacted by human health and hot and humid conditionsdwhich is the more significant cause of the projected global damage hinging greatly on East Asia, the Middle East, and North Africa. The benefits for developed nations are mainly due to a pattern of tourist flows skewed toward developed nations at higher latitudes (Farid et al., 2016;Eboli et al., 2010). ...
... Then there are threats of natural disasters like cyclones and storm surges IPCC, 2014), which had cost in the range of 0.1%e0.9% of GDP per annum during 1990e2018. It also fell heavily on the low-income developing countries, and the number of deaths due to disasters has also been higher each year in developing nations (IMF, 2019;Abeygunawardena et al., 2009;Eboli et al., 2010). Such disasters hamper economic growth and exacerbate poverty (Abeygunawardena et al., 2009;Farid et al., 2016). ...
... With the proximity to the equator; sea levels rising threats to small island countries and have limited readiness to leverage adaptation, therefore on social justice grounds and following their common but differentiated responsibilities and respective capabilities, developed countries are now expected to help developing countries financially in mitigation and adaptation activities (Farid et al., 2016). Eboli et al. (2010) estimates that developed nations like Russia, Europe, and Japan will tend to moderately gaining in terms of real potential GDP in the range of 1.2%e2.4% by the end of the century, while on the other hand, countries of East Asia will be down by as much as 12.6% and 10.3% for the Middle East and North Africa. This difference is attributed to labour productivitydimpacted by human health and hot and humid conditionsdwhich is the more significant cause of the projected global damage hinging greatly on East Asia, the Middle East, and North Africa. ...
... This difference is attributed to labour productivitydimpacted by human health and hot and humid conditionsdwhich is the more significant cause of the projected global damage hinging greatly on East Asia, the Middle East, and North Africa. The benefits for developed nations are mainly due to a pattern of tourist flows skewed toward developed nations at higher latitudes (Farid et al., 2016;Eboli et al., 2010). ...
Nowadays, environmental issues are a significant problem that are growing rapidly and have not been properly addressed. Unsolved problems resulting from environmental pollution indicate people's inability to manage local problems over external issues. Globally, the natural and built environments are under threat, due to climatic disturbances: sudden, destructive heavy rains and repetitive floods due to intense tropical storms. Environmental issues have become more widespread and intense due to increasing industrial and human impacts on the environment. There is a need for an effort to achieve the objective of increasing ecoefficiency in several sectors of the economy envisaged in the national sustainable development strategy. The term sustainability is a key element of the ecological balance. Sustainable development requires a consistent supply of fuels such as hydrogen which, in the long term, is both sustainable and readily available at an affordable price that can be used for every needy work without harming the social impact. For a long time, it has been recognized that resource depletion and environmental pollution are the byproducts of industrial production.
... Генерируемые человеком парниковые газы (их объемы и компонентный состав) зависят от уровня и интенсивности выбросов в результате экономической деятельности. Поэтому большинство исследований по изменению климата основаны на моделях и сценариях экономического роста [9]. Экономический рост, в свою очередь, зависит от последствий изменения климата. ...
... Эти зависимости влияют на экономику множественными и сложными способами, включая изменения в производительности, обеспеченности ресурсами, структурах производства и потребления. В исследовании [9] строится новая динамическая многорегиональная модель мировой экономики, основанная на вычислимых моделях общего равновесия (CGE) для ответа на вопросы о том, будут ли последствия изменения климата существенно влиять на рост и распределение богатства в мире; а также следует ли пересматривать прогнозы выбросов парниковых газов, вызванных деятельностью человека, с учетом последствий изменения климата. Результаты проведенных расчетов позволяют заключить, что, хотя траектории экономического роста и выбросов на глобальном уровне существенно не меняются, на региональном и отраслевом уровнях наблюдаются различия. ...
... С другой стороны, глобальные выбросы парниковых газов лишь немного уменьшаются при учете ответной реакции на изменение климата. Таким образом, постоянство антропогенных выбросов представляется разумным приближением для большинства физических климатических моделей, поскольку изменение климата является глобальным внешним фактором, и только глобальные выбросы и концентрации парниковых газов имеют значение при прогнозировании климата в будущем [9]. ...
Increase of the Earth’s average surface temperature observed in the last century has affected almost all countries of the world. No state has managed to escape the effects of global warming, and scientists predict that no country will escape a further increase in temperature. However, the highest temperature increases are expected in countries with relatively colder climates. The contribution of low-income developing countries, typically located in some of the hottest geographic areas of the planet, to atmospheric greenhouse gas concentrations is negligible, both in absolute and per capita terms. This article provides a meta-analysis of quantitative estimates of the damage caused by global climate change occurring on the planet since the last century. A rise in temperature has been shown to decrease per capita production in countries with relatively high average annual temperatures, which include most low-income countries. In these countries, the negative effect has long-term nature and operates through several channels, including decrease in agricultural production and labor productivity in sectors more exposed to weather; reduction in capital accumulation and deterioration of human health. Moreover, as evidence shows, in recent years macroeconomic indicators have not become less sensitive to temperature shocks, which points at significant limitations on countries’ adaptation to climate change. Meta-analysis of climate change damage estimates documented in relevant literature will, first, provide an idea of the scale of such estimates and help to assess the current state of knowledge in this area. In addition, a meta-analysis will demonstrate sensitivity of the results of calculations regarding assessment approach, measurement errors or insufficient data, choice of sample, etc. Finally, systematization of climate damage quantitative estimates is highly likely to be of practical importance for authorities and international organizations responsible for developing measures to deal with climate change and mitigate its effects, especially for developing and poor countries, most affected by the negative effects of global warming.
... A wide range of studies assess economic impacts of climate change-induced SLR using CGE models either analysing SLR as a single impact (Darwin and Tol 2001;Bosello et al. 2007;2012a;Pycroft et al. 2015;Tol et al. 2016;Joshi et al. 2016), or including SLR as part of a wider set of impacts (Deke et al. 2001;Bigano et al. 2008;Eboli et al. 2010;Ciscar et al. 2009Ciscar et al. , 2011Ciscar et al. , 2012Ciscar et al. , 2014Ciscar et al. , 2018Aaheim et al. 2012;Roson and van der Mensbrugghe 2012;Bosello et al. 2012b;Dellink et al. 2014;OECD 2015). ...
... The economic assessment is based on an extended version of the ICES CGE model used in climate change impact and policy assessments Bosello et al. 2012b;Eboli et al. 2010). The basic version is a recursive-dynamic multi-sector multi-country CGE model derived from the GTAP model (Hertel 1997). ...
... 5 It is also worth noting that this is the first time that we are able to include explicit estimates of capital losses. Previous assessments run with prior versions of the same CGE model did not include them at all (Bigano et al. 2008;Bosello et al. 2012a;Eboli et al. 2010), or followed a rather coarse method imposing the same loss of land stock on capital stock (Bosello et al. 2007(Bosello et al. , 2012bBosello and Parrado 2014). This is an improvement to our impact analysis, and therefore, we should expect higher economy-wide impacts in this study. ...
Climate change impacts on coastal zones could be significant unless adaptation is undertaken. One particular macroeconomic dimension of sea level rise (SLR) impacts that has received no attention so far is the potential stress of SLR impacts on public budgets. Adaptation will require increased public expenditure to protect assets at risk and could put additional stress on public budgets. We analyse the macroeconomic effects of SLR adaptation and impacts on public budgets. We include fiscal indicators in a climate change impact assessment focusing on SLR impacts and adaptation costs using a computable general equilibrium model extended with a detailed description of the public sector. Coastal protection expenditure is financed issuing government bonds, meaning that coastal adaptation places an additional burden on public budgets. SLR impacts are examined using several scenarios linked to three different Representative Concentration Pathways: 2.6, 4.5, and 8.5, and two Shared Socioeconomic Pathways: SSP2 and SSP5. Future projections of direct damages of mean and extreme SLR and adaptation costs are generated by the Dynamic Interactive Vulnerability Assessment framework. Without adaptation, all regions of the world will suffer a loss and public deficits increase respect to the reference scenario. Higher deficits imply higher government borrowing from household savings reducing available resources for private investments therefore decreasing capital accumulation and growth. Adaptation benefits result from two mechanisms: (i) the avoided direct impacts, and (ii) a reduced public deficit effect. This allows for an increased capital accumulation, suggesting that support to adaptation in deficit spending might trigger positive effects on public finance sustainability.
... Bosello et al. 2006). More recently, CGE models have also been used to study the economy-wide impacts of climate change in a dynamic setting (see Eboli et al. 2010;Bosello et al. 2012;Roson and Van der Mensbrugghe 2012;Bosello and Parrado 2014). ...
... As most studies come from grid-based data sets and models, they report data with a high spatial resolution, which permits the aggregation of data to match the regional aggregation of the ENV-linkages model. In some cases the source studies specified impact data with a regional aggregation tailored for other CGE models, including the ICES model 6 (Eboli et al. 2010;Bosello et al. 2012;Bosello and Parrado 2014), which was used as a reference for several climate impacts. The ICES model presents a regional detail very close to that of ENV-Linkages. ...
... Although there are significant differences between the modelling approach and calibration used here and in earlier economic studies of climate damages (not least in the calibration of the impacts and the specification of the economic response through national and international substitution effects), similar patterns emerge in e.g. Nordhaus (2007), Eboli et al. (2010, Bosello et al. (2012), Roson and Van der Mensbrugghe (2012), Bosello and Parrado (2014) and Ciscar et al. (2014). In these studies, global impacts are increasing more than proportionately with temperature increases (and hence over time) and amount to reductions of several percent of GDP by the end of the century. ...
This paper presents a new detailed global quantitative assessment of the economic consequences of climate change (i.e. climate damages) to 2060. The analysis is based on an assessment of a wide range of impacts: changes in crop yields, loss of land and capital due to sea level rise, changes in fisheries catches, capital damages from hurricanes, labour productivity changes and changes in health care expenditures from diseases and heat stress, changes in tourism flows, and changes in energy demand for cooling and heating. A multi-region, multi-sector dynamic computable general equilibrium model is used to link different impacts until 2060 directly to specific drivers of economic growth, including labour productivity, capital stocks and land supply, as well as assess the indirect effects these impacts have on the rest of the economy, and on the economies of other countries. It uses a novel production function approach to identify which aspects of economic activity are directly affected by climate change. The model results show that damages are projected to rise twice as fast as global economic activity; global annual Gross Domestic Product losses are projected to be 1.0–3.3% by 2060. Of the impacts that are modelled, impacts on labour productivity and agriculture are projected to have the largest negative economic consequences. Damages from sea level rise grow most rapidly after the middle of the century. Damages to energy and tourism are very small from a global perspective, as benefits in some regions balance damages in others. Climate-induced damages from hurricanes may have significant effects on local communities, but the macroeconomic consequences are projected to be very small. Net economic consequences are projected to be especially large in Africa and Asia, where the regional economies are vulnerable to a range of different climate impacts. For some countries in higher latitudes, economic benefits can arise from gains in tourism, energy and health. The global assessment also shows that countries that are relatively less affected by climate change may reap trade gains.
... Our choice of indicators draws from the United Nations' Inter-Agency Expert Group 37 and our model ensemble capabilities. Most SDG indicatorrelated metrics stem directly from the models used, while a small subset, mainly related to within-country social dimensions, are computed in the ICES-XPS SDG module 38,39 . This module runs a set of cross-country panel data regressions and combines the obtained coefficients with ICES-XPS model outputs in an out-of-sample estimation procedure. ...
... This open-access model is available at https://github.com/JGCRI/gcam-core/releases. ICES-XPS is a recursive-dynamic, general equilibrium model capable of assessing climate change mitigation impacts on the economy, including both regional and international market flows 38,39 . It assumes market equilibrium across all sectors and regions and is linked to a post-processing module capable of modelling several SDG indicators. ...
Climate action to achieve the Paris Agreement should respect the United Nations Sustainable Development Goals. Here, we use an integrated assessment modelling framework comprising nine climate policy models and quantify the impacts of decarbonisation pathways on Sustainable Development Goals in the European Union at regional and national levels. We show that scenario-consistent assumptions of future socio-economic trends and current climate policies would improve energy- and carbon-related aspects of sustainability and reduce inequalities. Ambitious net-zero emissions pathways would further improve health and agricultural productivity. Furthermore, countries currently lagging in achieving sustainable development goals would see the greatest benefits from ambitious climate action. Negative socio-economic impacts from climate action on poverty, hunger, and economic growth will require specific corrective policies. While our analysis does not quantify the negative effects of less ambitious climate policy, it demonstrates where co-benefits and trade-offs of greenhouse gas mitigation and sustainable development agenda exist and can guide policy formulation.
... The disadvantage of this method is that the underlying drivers of climate damages are unknown, and it is very uncertain whether historical empirical correlations between temperature and economic growth can be extrapolated to the (far) future. In earlier CBA studies, on the other hand, most estimates of damage functions relied on semi-qualitative assessments by experts, these assessments currently being considered as mostly outdated [11][12][13][14][15][16][17][18] . ...
... Compared with similar exercises 14,15,17 , the damage functions developed here use a higher level of regional detail and provide internally consistent uncertainty ranges. This high spatial granularity applies particularly to the European Union (EU), where the macro-economic impact assessments are determined at the NUTS2 level. ...
Economic analyses of global climate change have been criticized for their poor representation of climate change damages. Here we develop and apply aggregate damage functions in three economic Integrated Assessment Models (IAMs) with different degrees of complexity. The damage functions encompass a wide but still incomplete set of climate change impacts based on physical impact models. We show that with medium estimates for damage functions, global damages are in the range of 10% to 12% of GDP by 2100 in a baseline scenario with 3 °C temperature change, and about 2% in a well-below 2 °C scenario. These damages are much higher than previous estimates in benefit-cost studies, resulting in optimal temperatures below 2 °C with central estimates of damages and discount rates. Moreover, we find a benefit-cost ratio of 1.5 to 3.9, even without considering damages that could not be accounted for, such as biodiversity losses, health and tipping points.
... Prior studies by [3,4,9,11,12,[16][17][18]21,22,[30][31][32][33] investigated the relationship between climate change and economic growth in China using Johansen cointegration, Augmented Dickey Fuller and Granger causality test. The Johansen cointegration result showed that pollution which caused high temperature related to GDP negativelywhile granger causing pollution. ...
... A study by [10] using regression analysis establishes a statistically significant relationship between greater rainfall variability and lower per capita GDP. Other researchers with similar findings include [5,16,17,33,34]. [23] however, pointed out that a rise in precipitation or rainfall affects economic activity positively. ...
This study investigates the relationship between factors representing climate change
and economic growth in Malaysia, between years 1983 and 2013. The selected varibles
include precipitation (mm), temperature(˚C) and arable land (% of land used). The
objective of this paper is to understand the siginificance of precipitation, temperature
and arable land, towards gross domestic product (current LCU). The methodologies
employed are Augmented Dickey-Fuller (ADF) unit root test, Dickey-Fuller GLS (DF-GLS)
unit root test, the Johansen-Juselius Cointegration test, Vector Error Correction Model
(VECM) test, the Variance Decomposition (VDC) test and the Impulse Response
Function (IRF) test. The empirical results imply one cointegrating vector between
variables, indicating a unidirectional causality long term relationship between
precipitation, temperature and arable land towards GDP. Precipitation appears to be
the most exogenous variable whereas Temperature the most endogenous at a 50 year
horizon period. The IRF test concludes that the variables in this model are able to
recover from shocks caused by another variable within 5 years. The relatively short
revival period helps government to monitor the progress made by ongoing strategies.
Several policies are recommended for the benefit of the relevant government
authorities in dealing with the current climate crisis which will inevitably affect the
Malaysian economic growth.
... A first option to address this issue is to extend existing models or modelling frameworks as described above (see point 1). For example, general equilibrium models extended or linked with complex indicators in the field of social and environmental issues could play a role (see for example the ICES model by Eboli et al. 2010). In the field of bioeconomy, agricultural, forestry, food, wood, energy, and chemical PE models could be linked. ...
... 12.Overview of selected SDG targets by sustainable development layers(Philippidis et al. 2020) Notable is also the work done with the ICES model(Eboli et al. 2010;Campagnolo and Davide, 2019; http://parisreinforce.epu.ntua.gr/detailed_model_doc/ices) to assess and monitor current well-being and future sustainability. The model has been extended to include 28 indicators related to the 17 SDGs16 of the country level ASDI indicators are based on model results, seven are linked via regression analyses (SDG1, SDG2, SDG3a, SDG3b, SDG4, SDG7a, SDG10), and four remaining (SDG14, SDG15a, SDG15c, SDG16) are kept historically constant. ...
... Climate change has become one of the main concerns in developing countries, since they are more vulnerable to its adverse effects (Tol, 2018). In particular, the impact of climate change on economic growth in developing countries has attracted rising attention from many scholars such as Akram (2012), Eboli et al. (2010), and Lecocq and Shalizi (2007). However, most studies focus on cross-country analysis that does not eliminate differences in many aspects such as landforms, geography, culture, and population. ...
... Akram (2012) also indicates that the most and the least vulnerable sectors to climate change are agriculture and manufacturing, respectively. To Eboli et al. (2010), developing countries suffer the most from the impacts of climate change. Similarly, Letta and Tol (2019) find the interesting result that the negative impact of climate change on TFP growth only exists in poor countries, while in rich countries it is indistinguishable from zero, because poor countries are more vulnerable to climate change than rich countries. ...
Using the Feasible Generalized Least Squares econometric method, the paper analyzes the impact of climate change on economic growth in Vietnam’s coastal South Central region over the period of 2006–2015. The results indicate that, after controlling for the main determinants in the growth model, the climate change with various proxies has a significantly negative impact on provinces’ economic growth in the region. In particular, local institutions not only increase economic growth, but also reduce the negative impact of climate change on economic growth as well. These results suggest some policy implications aimed at boosting the process of transforming the economic growth model for the coastal region adapting to climate change.
JEL codes: F21, F23, E22
... The modelling framework used to develop SDG projections is the ICES model, (Eboli et al. 2010;Delpiazzo et al. 2017), a global CGE model based on the GTAP model (Corong et al. 2017) and running over the period 2007-2030 with recursive dynamics. The baseline scenario assumes no mitigation policies are implemented until 2030, while the mitigation policy scenario simulates the implementation of the conditional Nationally Determined Contributions (NDCs) submitted to the UNFCCC in the context of the Paris Agreement. ...
... ICES is a recursive-dynamic multiregional Computable General Equilibrium (CGE) model developed to assess the impacts of climate change on the economic system and to study mitigation and adaptation policies (Eboli et al. 2010). The model's general equilibrium structure allows for the analysis of market flows within a single economy and international flows with the rest of the world. ...
This chapter provides an ex-ante, quantitative assessment of the synergies and trade-offs between the implementation of the Paris Agreement and sustainable development. It develops a framework for comparing historical and future sustainability performance that combines a Computable General Equilibrium model for describing future global and regional baseline and policy scenarios to 2030 with empirically-estimated relationships between macroeconomic variables and sustainability indicators. Results indicate that the commitments submitted within the Paris Agreement reduce the gap toward a sustainable 2030 in all regions, but heterogeneity across regions and sustainability indicators call for complementary sustainable development polices.
... We follow a top-down methodology as described in Swan and Ugursal (2009) 9 , increasingly being used as a computationally efficient alternative [10][11][12][13] to process-based simulation models [14][15][16][17] . Engineering bottom-up models are generally applied to specific countries or regions to simulate energy performance of specific buildings or building archetypes, and to forecast specific end uses in the near term 18 . ...
... These intervening adjustments ultimately drive the economic impacts, such as changes in household incomes and welfare. Their scale and scope depend on future changes in structural, technological, and market characteristics that top-down, empirically based approaches imperfectly reflect, and that can be better analyzed using IAM or CGE frameworks [14][15][16][17] . ...
Future energy demand is likely to increase due to climate change, but the magnitude depends on many interacting sources of uncertainty. We combine econometrically estimated responses of energy use to income, hot and cold days with future projections of spatial population and national income under five socioeconomic scenarios and temperature increases around 2050 for two emission scenarios simulated by 21 Earth System Models (ESMs). Here we show that, across 210 realizations of socioeconomic and climate scenarios, vigorous (moderate) warming increases global climate-exposed energy demand before adaptation around 2050 by 25-58% (11-27%), on top of a factor 1.7-2.8 increase above present-day due to socioeconomic developments. We find broad agreement among ESMs that energy demand rises by more than 25% in the tropics and southern regions of the USA, Europe and China. Socioeconomic scenarios vary widely in the number of people in low-income countries exposed to increases in energy demand.
... Although there are significant differences between the modelling approaches, the macroeconomic projections of the OECD's ENV-Linkages model are well aligned with the literature on quantified economic damage (see Nordhaus, 2011;Eboli et al., 2010;Bosello et al., 2012;Roson and Van der Mensbrugghe, 2012; Bosello and Parrado, 2014;Ciscar Martinez, 2014). An average projection of a 2% impact on global GDP is assumed in the simulation exercises, the same as is found in many studies that quantify the impact of climate change on the global economy 5) . ...
We propose to examine how climate damage may transform Vietnam's long-run growth rate. Because of cross-country linkages forged by bilateral trade, there are two channels through which international damage spillovers may occur. First, the dynamics of partners' growth determine future trends in Vietnam's volume of exports. Second, since the domestic impact of climate change may be heterogeneous across countries, there will be a differentiated impact on export and import market shares. Both terms play a critical role in changing trade patterns that are likely to shift Vietnam's external constraint. This demand-side view of growth based on the balance-of-payments constraint is a powerful predictor of inter-country growth differences. Our study show that the consequences of climate change could equate to a 2.5% reduction in Vietnam's growth rate over the period 2020-2060. Our decomposition exercise by effect and by partner area shows that international damage spillovers result from very different individual behaviours.
... Interestingly enough, they also nd that the increases in temperature and precipitation do not seem to have a signi cant effect on the yields of the two most important crops, namely corn and soybeans. Eboli et al. (2010) use a multi-regional dynamic general equilibrium model (CGE) to examine the impact of climate change on the level of economic growth. ...
This paper provides fresh evidence of temperature effects on GDP per capita growth and economic policy uncertainty (epu). We apply the quantile via moments methodology (Machado and Santos Silva, 2019) in a sample of 35 countries for the period 1980–2021, the most current time frame of the work we reviewed. To the best of our knowledge, temperature effects on epu, in a panel quantile setting, have not been examined before. Our empirical results provide evidence in favor of asymmetric temperature impacts on both growth rates and epu. Specifically, we find that: First, the impact of temperature and of its interaction with economic policy uncertainty on the growth rate is negative, quadratic, and more intense for poorer countries. Second, the combined temperature and policy uncertainty effect on growth rates is of greater magnitude compared to the simple temperature effect. Third, hotter countries are more vulnerable to economic policy uncertainty, with the effect being more pronounced as uncertainty increases.
JEL Classification: C33, O13, Q54, Q56.
... An association has been established 14 years ago with the purpose of Gambhir et al., 2019;Weyant, 2017) creating a community of scholars and practitioners focused on integrated modelling for climate change. 1 In addition to these two broad classes of integrated assessment models, additional numerical approaches have been developed over the years. A large number of computable general equilibrium (CGE) models are now available, though not always classified as IAMs (Parrado, 2010;Rausch et al., 2011). These models, alongside dynamic stochastic general equilibrium (DSGE) ones, have a detailed representation of economic sectors and of their interaction. ...
Computational social science can help advance climate policy and help solve the climate crises. To do so, several steps need to be overcome to make the best use of the wealth of data and variety of models available to evaluate climate change policies. Here, we review the state of the art of numerical modelling and data science methods applied to policy evaluation. We emphasize that significant progress has been made but that critical social and economic phenomena—especially related to climate justice—are not yet fully captured and thus limit the predictivity and usefulness of computational approaches. We posit that the integration of statistical and numerical approaches is key to developing a new impact evaluation science that overcomes the traditional divide between ex ante and ex post approaches.
... Next, the methodology connects the asset-level acute shocks to sector-level chronic shocks (depicted in the third block) obtained from macroeconomic models. In their application, Bressan et al. (2022) leverage the outputs of the ICES macroeconomic model (Bosello et al., 2020, Eboli et al., 2010, Parrado and De Cian, 2014, with various climate scenarios defined as a combination of Representative Concentration Pathways (RCP) and Socio-Economic Shared Pathways (SSP), up to 2050. The shock on sector output is expressed as a ratio between the baseline output (i.e., no climate-related hazard and scenario) and climate-adjusted output. ...
Is climate change a financial risk that financial institutions need to worry about? Despite the rapid increase in climate financing and the rise of the dominant discourse on the importance of climate change and environmental, social and corporate governance (ESG) criteria, financial markets do not seem to show much sensitivity to the increasing climate risks. The problem arguably lies in the fact that the markets seem to have difficulties estimating the specific costs of climate change, which, although potentially high, often remain long-term and uncertain. The benefits of adjusting to climate risks also seem harder to quantify for shorter-term investments.
Most international actors that provide development finance seem to have difficulty estimating the specific costs of climate change risks. Climate risks can be low or high, short-term or long-term, and more or less uncertain. Yet, understanding the particular nature of climate risks clearly could help in pricing climate-risk finance and the proper allocation of funding for climate action. In particular, investments in climate adaptation, which are perceived by many financial actors as a costly endeavour, could become financially more attractive if the corresponding reduction in climate risk exposure were not only qualitatively considered, by explicitly priced. This would have serious implications for development finance institutions and their incentive to invest in climate adaptation operations in developing countries most affected by climate change, with a high socio-development impact.
This paper considers why effective climate risk assessment should matter for financial institutions. We present different approaches to measuring climate risk used by some European financial institutions with a public mandate, including a multilateral development bank (MDB) - the European Investment Bank (EIB), development financial institutions (DFIs) - the British International Investment (BII) and the Dutch entrepreneur development bank (FMO), national promotional and development banks - the German Kreditanstalt für Wiederaufbau (KfW) and Italian Cassa Depositi e Prestiti (CDP); and export credit agencies - the Atradius Dutch State Business (Atradius DSB), and French Bpifrance. These institutions have adopted climate, and often explicit ESG, approaches and climate risk assessments. Increasing efforts are also dedicated to further improving their approaches. Yet, they encounter several difficulties and limitations in their attempt to assess climate risks.
Limitations encountered in climate risk assessment that could lead to mispricing include:
1. Underestimation or overestimation of the climate risks
2. Lack of proper methodologies to measure climate risks
3. Assessments are generally done at the macro-level
4. Data on climate risk variables is usually missing
5. Lack of a central database providing data on all climate risk indicators
6. No harmonised industrial standards and a proper regulatory framework
It is essential to overcome the challenge of climate change mispricing (over- and under-estimation) of the risks to ensure that physical and transition risks are precisely predicted. This necessitates that financiers and investors, in general, alter their strategies, incentives and approaches, including by exploiting the opportunities provided by climate risk assessment models and strategies. Development financiers can play a pioneering role in that respect. MDBs like the EIB and DFIs like BII and FMO should not only continue their respective current endeavours to further enhance their overall climate/ESG, and climate-risk assessment approaches. They should also coordinate their efforts to lead the (European) development finance community in better addressing climate change, improve risk assessment approaches and try to explicit price climate risks. By doing so, they can also leverage private finance actors and have a catalytic demonstration effect on how to better climate risks.
While climate finance has significantly increased for mitigation, it is seriously lagging for adaptation. In particular, in Europe, financial institutions for development have generally failed to invest at scale in climate adaptation, often arguing that they are not enough bankable projects. Improving climate risk approaches, explicitly pricing climate risks, can play a significant role in boosting private and public finance to tackle climate change, including for adaptation.
In terms of physical climate risk, there is a need to adopt proper methodologies to assess the risk from chronic and acute shocks on a highly granular level and connect asset-level physical risks to firms’ and investors’ financial risks. Such enhanced approaches could usefully draw on Bressan et al. (2022). They developed the first comprehensive methodology that logically connects asset-level physical risks to financial risks for firms and financial actors and, more broadly, to systemic risk for the financial system. It does so by translating economic losses on physical assets and sectors from chronic and acute climate physical risks into financial losses and shocks on prices in the market. It allows for a dynamic, asset-level assessment of physical climate risk, considering the cascading losses through the ownership chains of firms and investors.
Key policy recommendations for financial institutions that could lead to better assessment and improved climate risk pricing include:
1. Develop a reliable database to provide information on climate-related risks
2. Improve the transparency of the risk assessment methodologies
3. Develop harmonised climate risk assessment methodologies
4. Support the establishment of project-level climate risk assessment
5. Exploit the potential of insurance companies
6. Address the information asymmetry and knowledge gaps
7. Enforce climate-related regulation at all levels
8. Embody climate risk assessment in overall sustainable investment strategy and use concessional financing to cover high climate risks
9. Explicitly price climate risks and net returns from climate adaptation.
This work was conducted in the European Commission H2020-funded CASCADES (CAScading Climate risks: towards ADaptive and resilient European Societies) project, Grant agreement number 821010.
https://www.cascades.eu/publication/climate-risk-mispricing-why-better-assessments-matter-in-financing-for-development/
... They predict that 3.5 o C increase in global mean surface temperature until 2100 would reduce global output by 7% to 14%, with even higher damages in tropical and poor regions. Moreover, climate change may also affect the growth rate of the economy (Bretschger and Valente 2011;Eboli et al. 2010;Fankhauser and Tol 2005;Hallegatte 2005;Lemoine and Kapnick 2016). Although the impact of climate and climate change on economic growth and development is not well understood, and some studies have reached opposite conclusions (Tol 2018), there is still much empirical evidence in this field. ...
This paper studies climate change impacts on total factor productivity (TFP) in China using economic and climatic data for provincial capital cities and municipalities from 1998 to 2017. We employ a novel nonparametric quantile method to decompose historical temperature data into multiple temperature quantiles, which are then used in our regression analysis to avoid estimation bias caused by seasonal heterogeneity of temperatures across China. Specifically, we create three temperature quantiles for each city to represent their extremely high temperatures in summer, extremely low temperatures in winter, and mild temperatures in spring and fall. In general, we find that a warming climate has a significant negative impact on TFP in the long-run, while in the short term, only increases in extreme temperatures exert significant negative effects on TFP growth. However, the temperature effects on TFP vary substantially across coastal capital cities, inland capital cities, and municipalities due to their differences in geography, development levels, and political positions. Finally, our results are robust when spatial spillover, temporal lagging, and labor intensity effects are taken into account.
... The reasons for these estimates are that Chile is far from the Equator, has a mild weather across many of its regions, and presents a lower sensitivity of the local weather relative to global changes. It is also worth noting that Chile was among the countries in the RoA1 region that Eboli et al. (2010) predicted would benefit from climate change in 2050 and 2100 in terms of overall GDP and also in terms of the agriculture, energy demand, health care, and tourism flow activities. 7 The Swiss Re 2021 study predicts that Chile may suffer a GDP loss by 2050 between 0.9 and 3%, but these estimates are well below the damages suffered by the worst countries in their sample (which includes only 48 countries, a minor sample relative to the more than 100 countries covered in most climate studies). ...
I review several studies for the future impact of climate change during the twenty-first century, making a comprehensive summary of the effects estimated for Chile. Several studies suggest that Chile is likely to suffer mild effects in terms of GDP growth, labor productivity, and mortality costs from climate change in the twenty-first century. However, there is substantial uncertainty around these estimates, with at least one study predicting significant GDP losses due to adaptation difficulties. I compute a principal component factor that summarizes the information from six different measures of GDP loss as a single variable, showing a low principal component value for Chile. Furthermore, several studies find that Chile may face non-GDP-related problems from climate change, such as air pollution, fire hazards, drought, water stress, biodiversity loss, ecosystem damages, and human migration. Finally, according to several indexes, Chile is still only in the middle of the table in terms of policy, infrastructure, and climate readiness. Chile is also below several developed countries in terms of government expenditure on environmental protection and environmental taxes, while at the same time presenting a high value of fossil fuel subsidies. Therefore, there is substantial room to improve economic and environmental policies to fight climate change.
... Computable General Equilibrium (CGE) models have also been used in the literature to study the interrelationships of production sectors and their impact on climate change (Eboli et al 2010). CGE models, unlike IO models, capture supplyside effects and allow for more flexibility, due to their non-linearity, regarding substitution effects and relative price changes Published in partnership with CECCR at King Abdulaziz University (Koks et al. 2016). ...
Anthropogenic greenhouse gas (GHG) emissions coming mainly from fossil fuel combustion for energy use are causing air temperature increases resulting in climate change. This study employs an environmentally extended input–output model to conduct an economy-wide assessment of GHG emissions in the European Union (EU). Model results indicate that the assumed growth of economic activity by 2030 will lead to a large increase in GHG emissions by 89%, assuming no technological change and no additional policy mitigation efforts. The electricity sector and agriculture create the highest direct and indirect GHG emissions per unit of economic output across the 27 EU member states (EU-27); for every 1-million-euro-increase in the final demand for the products and services of the electricity sector and agriculture, 2198 and 1410 additional tons of GHG emit, respectively. Regional climate projections under a low-decarbonisation pathway (RCP8.5), in accordance with our economic analysis, indicate a further increase of regional warming, combined with pronounced changes in the hydrological cycle. Contrariwise, following a strong mitigation pathway (RCP2.6) will result in warming levels lower than 1.5 °C with respect to the 1986–2005 reference period. Our findings reveal the importance of both direct and indirect contribution of economic sectors in the generation of GHG emissions, taking into consideration the size of the sectors and the assumed growth rates. The design and implementation of sectoral emission reduction policies from the perspective of the whole production supply chain can effectively contribute to GHG emission reduction commitments.
... Furthermore, their implementation is extremely complex, with what some have called " [un] realistic plans" to achieve them (Spangenberg, 2017, p. 318). For example, while economic growth has a positive effect on social issues such as the reduction of poverty (Spaiser et al., 2017), its increase has been largely considered to be incompatible with reducing our impact on climate and biodiversity (Eboli et al., 2010;Rosales, 2008). ...
Purpose
This study aims to understand how businesses can contribute to the achievement of the UN sustainable development goals (SDGs) by implementing Local Agenda 21 (or equivalent) plans in partnership with other organizations situated in their city. To this end, the present study examines drivers and outcomes from the perspective of business partners, as well as their relationships to the SDGs.
Design/methodology/approach
Through a mixed-methods approach this research studies 71 businesses from four large cross-sector partnerships formed to achieve local sustainability goals. Data were collected through a survey to determine why firms partner and what outcomes they obtain from partnering. Qualitative content analyses are used to determine the relationships between business drivers and outcomes from partnering for local sustainability and the SDGs.
Findings
From a resource-based view (RBV) perspective, findings show the value of local sustainability partnerships in relation to the SDGs. Many SDG targets are aligned with the top reasons why businesses join large community sustainability partnerships. Also, through the outcomes achieved by participating in the partnership businesses can further the SDGs.
Research limitations/implications
This research contributes to the literature and to practice through the understanding of businesses partnering for local sustainability, and its relationships to global sustainability. Firstly, the connections of business partners to local and global sustainability are better understood. Of note is the contribution made to the literature on sustainability-related drivers and outcomes expanding and refining RBV literature. Secondly, a positive connection has been established between businesses and the SDGs, proposing a virtuous model of relationship that summarizes the findings from this research. And thirdly, large cross-sector social partnerships are better understood.
Practical implications
Small- and medium-sized enterprises and large corporations with local offices can further both local and global sustainable development by engaging in local cross-sector sustainability partnerships.
Social implications
These research findings are crucial for those leading sustainability initiatives, so they can engage businesses actively in light of the important role they play in society improving their contributions and the chances for sustainability partnerships to achieve their goals.
Originality/value
This research contributes to the scale conversation by exploring community sustainability partnerships as a means to understand how business engagement in sustainability at the local level can contribute to the achievement of the SDGs and, ultimately, to global sustainability.
... ICES is a recursive-dynamic multi-regional CGE model developed to assess economy-wide impacts of climate change policies (Eboli et al., 2010); for the purposes of this study, the XPS version is used (Parrado et al., 2020) with a more detailed representation of government behaviour and private households. Like GEMINI-E3, it assumes market equilibrium simultaneously in each market or region and requires calibration to data on national and international socio-accounting information as well as a series of elasticities of substitution. ...
Recent calls to do climate policy research with, rather than for, stakeholders have been answered in non-modelling science. Notwithstanding progress in modelling literature, however, very little of the scenario space traces back to what stakeholders are ultimately concerned about. With a suite of eleven integrated assessment, energy system and sectoral models, we carry out a model inter-comparison for the EU, the scenario logic and research questions of which have been formulated based on stakeholders' concerns. The output of this process is a scenario framework exploring where the region is headed rather than how to achieve its goals, extrapolating its current policy efforts into the future. We find that Europe is currently on track to overperforming its pre-2020 40% target yet far from its newest ambition of 55% emissions cuts by 2030, as well as looking at a 1.0–2.35 GtCO2 emissions range in 2050. Aside from the importance of transport electrification, deployment levels of carbon capture and storage are found intertwined with deeper emissions cuts and with hydrogen diffusion, with most hydrogen produced post-2040 being blue. Finally, the multi-model exercise has highlighted benefits from deeper decarbonisation in terms of energy security and jobs, and moderate to high renewables-dominated investment needs.
... A smaller strand of literature uses computable general equilibrium (CGE) models to examine the economic implications of climate change impacts with explicit causal links built into the models (e.g. Bosello et al., 2006, Eboli, Parrado and Roson, 2010, Roson and van der Mensbrugghe, 2012. ...
... The broad consensus among scientists is that climate change is affected by the concentration of GHG's in the atmosphere, with recent anthropogenic contributions widely recognised as the driving factor accelerating climate change (Eboli et al., 2010;IPCC, 2014;Brown et al., 2016). Yet, while SSA contributes some of the smallest proportions of global GHG emissions at less than 5 per cent of the total carbon output, it bears disproportionate adverse effects of climate change (Rehdanz & Maddison, 2003;Mendelsohn et al., 2006;UNDP, 2006;Tol 2009). ...
While climate change has harsh universal impacts, it is believed that its negative effects fall disproportionately on hotter, developing regions. This paper examines these claims using a panel datasets for 84 OECD and Sub- Saharan African countries between 1970–2018. I document both the evolution of country-specific temperatures and the long-term economic impact of temperature and precipitation variations on GDP per-capita. Using a panel auto-regressive distributed lag model on the sample mentioned above, I found that temperatures have unanimously increased for all sample-countries and that variations in temperature above historical norms significantly reduced income-growth. No significant relationship was found between precipitation and income growth. When interacting ‘poor’ and ‘hot’ country variables, I found that temperature variations disproportionately affected both hotter and poorer Sub-Saharan African countries. In OECD countries, temperatures have increased more quickly relative to their historical norms than Sub-Saharan African countries. Finally, while poorer and developing countries are more adversely affected by temperature variations, they seem to recover more quickly from temperature shocks than sample averages. I explain these results and link them to potential policy implications regarding global sustainable development and greenhouse gas abatement.
... They show significant differences in both national and global welfare effects between the two options and argue that the optimal adaptation lies in between the two extremes. Eboli et al. (2010) apply another dynamic variant of the GTAP model (ICES) to analyze the effects of temperature change on global economic growth and wealth distribution. They find that macroeconomic effects are sizeable, but there are significant distributional effects at the regional and sectoral levels. ...
... Most studies rely on multi-model frameworks that couple a GE model or an integrated assessment framework with a more detailed energy or building sector bottom-up model. Eboli et al (2010) and Francesco Bosello et al (2012) for instance couple the top-down recursive-dynamic computable GE model (ICES), used for the assessment of the macroeconomic impacts of climate change with the bottomup POLES model. Specifically, shocks from the POLES energy system model are used to calibrate the intensive margin in ICES. ...
The paper systematically reviews and compares 88 scenarios of energy demand in commercial and residential buildings that include the additional energy use or savings induced by thermal adaptation in heating and cooling needs at global level. The resulting studies are grouped in a novel classification that makes it possible to systematically understand why the energy projections of integrated assessment models vary depending on how changes in climatic conditions and the associated adaptation needs are modeled. Projections underestimate the energy demand of the building sector when it is driven only by income, population, unchanging climatic conditions and their associated adaptation needs. Across the studies reviewed, already by 2050 climate change will induce a median 30% (90%) percentage variation of a building's energy demand for cooling and a median -8% (-24%) percentage variation for heating, leading to a 2% (13%) increase when cooling and heating are combined, under the Representative Concentration Pathway 1.9 (8.5). The results underscore that models lacking extensive margin adjustments, and models that focus on residential demand, highly underestimate the additional cooling needs of the building sector. Topics that deserve further investigation regard improving the characterization of adopting energy-using goods that provide thermal adaptation services and better articulating the heterogeneous needs across sectors.
... Die daraus folgenden ökonomischen Wirkungen hängen vom geldpolitischen Regime und auch von den Erwartungsbildungsprozessen der Akteure ab. Falls der Klimawandel das BIP reduziert, kommt es selbst bei einer konstanten Spar-und Investitionsquote zu sinkenden Investitionen, was sich über einen reduzierten Kapitalstock negativ auf die Wachstumsrate des BIP auswirkt (Fankhauser, Tol 2004 Wird berücksichtigt, dass der Klimawandel global eintritt, geraten auch internationale Rückwirkungen in den Blick (Eboli et al. 2009, Dellink et al. 2017 Aufgrund der Lieferverflechtungen zwischen den Wirtschaftsbereichen wirken die Impulse von Klimaschäden und Anpassungsmaßnahmen weit über die unmittelbar betroffenen Branchen hinaus. Die insgesamt ausgelösten Produktionseffekte sind größer als der ursprüngliche Impuls, unterscheiden sich in ihrer Höhe aber nach der jeweiligen Maßnahme. ...
Mit der in diesem Bericht dargestellten Analyse wurde die Vertiefung des Wissens zu Schadenspotentialen ausgewählter Klimawirkungen und zu Anpassungsmaßnahmen, in Zusammenarbeit mit dem Behördennetzwerk „Klimawandel und Anpassung“, in Deutschland angestrebt. Zum einen wurden Schadenspotenziale prioritärer klimawandelgebundener Risiken für Gesellschaft, Wirtschaft und Ökosysteme in Deutschland bestimmt und, wo möglich, volkswirtschaftlich bewertet. Zum anderen wurden beispielhaft Maßnahmen- und Instrumentenanalysen und deren Kosten erörtert.
Für die Schwerpunkte Starkregen und Sturmfluten wurden derzeitige Schadenspotenziale, mögliche Veränderungen aufgrund des Klimawandels sowie, wo möglich, die Wirkung von Anpassungsmaßnahmen abgeschätzt. Für die Schwerpunkte hitzebedingte Todesfälle (Hitzetote), menschliche Leistungsfähigkeit, Waldbrand und Wassererosion wurden mögliche Veränderungen durch den Klimawandel und entsprechende Schadensprozesse eingehend betrachtet. Wo die Datenlage es erlaubte, wurden zukünftige Veränderungen des Schadenspotenzials aufgrund des Klimawandels oder sozio-ökonomischer Veränderungen (wie verstärkte Bebauung) quantifiziert. Im zweiten Teil der Untersuchung wurden Maßnahmen- und Instrumentenanalysen und ausgewiesene Kosten beispielhaft erörtert. Tendenziell dämpfen makroökonomische Interdependenzen die Folgewirkungen der Klimaschäden und Anpassungsmaßnahmen. Jedoch können die sektoralen und lokalen Wirkungen gravierend ausfallen. Soweit rechenbar, berühren Klimaschäden den Wachstumspfad der gesamten Volkswirtschaft nur wenig. Gesamteinschätzungen der Schäden durch den Klimawandel, soweit sie monetär bewertbar sind, kommen für mitteleuropäische Länder unter Berücksichtigung von Folgewirkungen in einem 2°C-Klimaszenario bis zur Mitte des Jahrhunderts zu Kostenschätzungen unter 0,2% des BIP. Die Wohlfahrtsverluste fallen aber deutlich höher aus.
Der vorliegende Bericht entstand im Rahmen des Forschungsvorhabens „Behördenkooperation Klimawandel und Anpassung“, welches das übergeordnete Ziel verfolgte, systematisch die fachwissenschaftlichen Leistungen zu erarbeiten, die erforderlich sind, um die potenziellen Schäden durch den Klimawandel sowie die Möglichkeiten einer erfolgreichen und effizienten Klimaanpassung in Deutschland zu identifizieren.
... These shocks are generally integrated in CGE baselines as sector-specific exogenous shocks to the production function, as discussed by Sue Wing and Lanzi (2013), and they can be considered as drivers of supply-side structural change. Examples of integration of environmental damages in CGE baselines can be found in several papers on climate (Roson and van der Mensbrugghe, 2012;Ciscar et al., 2011;Eboli et al., 2010;Bosello et al. 2012;Dellink et al., 2019) and a few on air pollution (Lanzi et al., 2018;Vrontisi et al. 2016;Vandyck et al., 2018). Even if introducing environmental damages in a baseline might not be essential for all CGE teams, this issue will gain increasing importance as climate change impacts become more apparent. ...
A recent review of common modelling practices conducted during the Workshop “Shaping long-term baselines with Computable General Equilibrium (CGE) models” held at OECD in January 2018 showed that models include different assumptions on changes to the production function along their dynamic baselines. These changes imply shifts in sectoral compositions for the projected economies (i.e. structural change). This paper reviews the assumptions made by 24 modeling teams about supply-side drivers of structural change: primary factor efficiency and changes in input-output structures of the production function over time. We critically review various methodologies, identifying state-of-the-art practices, and we propose simple guidelines, particularly focusing on consistency between data sources and models. The review highlights that most models take into account structural change to some extent. However, more effort is needed in modelling projected changes in input-output structures. Furthermore, this review is helpful for understanding the functioning of dynamic CGE models and in assisting dynamic CGE modelers in building their own baselines.
... However, the negative impact is much greater in agriculture in comparison with manufacturing and services. The authors also found that in the provinces of Balochistan Fabio et Al (2010) analyzed the impact of climate change on economic growth using dynamic multiregional computable general equilibrium (CGE) on the world economy. The authors found climate change had the most impact on developing countries. ...
... The overall complexity of connections among tourism development, economic growth and climate change has been examined by only a small number of studies (Dell, Jones, & Olken, 2012), either in quantitative or in qualitative terms (Eboli, Parrado, & Roson, 2010). ...
In Croatia, tourism is one of the most important economic activities, accounting for 2.1% of total tourist flows in the European Union and 18% of the total Croatian gross domestic product. Economic development and tourism flows are influenced by the increasing intensity of climate change, leading to a need to adapt to new business conditions to minimize the negative and maximize the positive effects. The objective of the current study is to empirically research the role of tourism in the Croatian economy for the period 2004-2015 and the impact of climate change on tourist flows. To investigate experts’ opinions on the impact of climate change on Croatian tourism, this study employs a qualitative approach to obtain comprehensive insights into tourism, climate change and scientific research. By conducting in-depth interviews with experts and identifying the challenges posed by the current impact of climate change on Croatian tourism, the authors gain deeper insights into tourism development and climate change that reflect the current situation in Croatia. The results indicate that climate change will not have a negative impact on Croatian tourism in the near future. However, after 2050, a number of adaptation measures will be required to maintain the current tourism status.
... The Inter-temporal Computable Equilibrium System (ICES) model (Eboli, Parrado, & Roson, 2010) is at the core of our modelling framework (see Appendix II for more details). ICES is a recursive dynamic CGE model: a multi-market model linked to current real economy data observed in the benchmark year, based upon the merging of national social accounting matrices into a global economic database GTAP8 (Narayanan et al., 2012). ...
The paper investigates potential synergies and trade-offs between emission reduction policies and sustainable development objectives. Specifically, it provides an ex-ante assessment that the impacts of the Nationally Determined Contributions (NDCs), submitted under the Paris Agreement, will have on the Sustainable Development Goals (SDGs) of poverty eradication (SDG1) and reduced income inequality (SDG10). Through this research we aim at answering the following questions: does mitigation policy always imply a trade-off with development objectives? If this is the case, what is the magnitude of the effect of the new international climate architecture on poverty and inequality? By combining an empirical analysis with a modelling exercise, the paper estimates the future trends of poverty prevalence and inequality across countries in a reference scenario and under a climate mitigation policy with alternative revenue recycling schemes. Our study finds that a full implementation of the emission reduction contributions, stated in the NDCs, is projected to slow down the effort to reduce poverty by 2030 (+4.2% of the population below the poverty line compared to the baseline scenario), especially in countries that have proposed relatively more stringent mitigation targets and suffer higher policy costs. Conversely, the impact of climate policy on inequality shows opposite sign but remains very limited. If financial support for mitigation action in developing countries is provided through an international climate fund, the prevalence of poverty will be slightly reduced at the aggregate level, but the country-specific effect depends on the relative size of funds flowing to beneficiary countries and on their economic structure. The output of our analysis contributes to the emerging literature on the linkages between climate change policy and sustainable development, although we capture only partially the complex system of interrelations and feedbacks proper of the SDGs. Moreover, due to its policy relevance, it further enriches the debate on the implementation of the Paris Agreement and its climate finance tools.
... There may be more uncertainties in temperature changes at regional scales. This uncertainty will in turn affect local agriculture, fisheries, urban construction and economic policy formulation (Gurung and Bhandari, 2009;Eboli et al., 2010;Chalise and Naranpanawa, 2016). ...
In the context of global warming, significant differences in temperature changes occur in different regions. Obtaining a more accurate temperature distribution is important in studying regional climate change. A high accuracy surface modeling (HASM) is introduced using the air temperature output from the weather research and forecasting (WRF) model as the driving field, and observation data from meteorological stations as the accuracy control conditions to obtain 30 years of high accuracy temperature fields in the Heihe River Basin. Verified by ground‐based observations, the WRF model has a limited ability to simulate temperature conditions and performs worse in low altitude area and in winter. The fusion results of the HASM decrease the MAE from 2.21°C to 0.9°C and decrease the RMSE from 2.58°C to 1.16°C, thus significantly increasing the accuracy compared with the original simulation from the WRF model and resulting in a more reasonable temperature analysis. The Mann‐Kendall test shows clear warming in the Heihe River Basin, but there is a mutation year of 1998 in winter and annual average. This study also analyzes the space‐time distributions of and variations in the temperature from the HASM results by dividing the study period into three subperiods. The analysis shows consistent warming, except for winter T3‐T2 period, in which the northeast area of the lower reaches of the Heihe River Basin was cool. Temperature changes in the Heihe River Basin also show that the sparsely populated Gobi Desert in the north and the southern high mountains show extreme sensitivity to climate change.
... Hope 2006;Nordhaus 2013;Waldhoff et al. 2014) and computable general equilibrium models (CGEs, e.g. Eboli et al. 2010;Ciscar et al. 2011;Roson and van der Mensbrugghe 2012;Dellink et al. 2014). The former have been criticized recently for, among other points, excluding growth impacts by design and therefore underestimating the long-term costs of climate impacts (e.g. ...
Despite increasing empirical evidence of strong links between climate and economic growth, there is no established model to describe the dynamics of how different types of climate shocks affect growth patterns. Here we present the first comprehensive, comparative analysis of the long-term dynamics of one-time, temporary climate shocks on production factors, and factor productivity, respectively, in a Ramsey-type growth model. Damages acting directly on production factors allow us to study dynamic effects on factor allocation, savings and economic growth. We find that the persistence of impacts on economic activity is smallest for climate shocks directly impacting output, and successively increases for direct damages on capital, loss of labor and productivity shocks, related to different responses in savings rates and factor-specific growth. Recurring shocks lead to large welfare effects and long-term growth effects, directly linked to the persistence of individual shocks. Endogenous savings and shock anticipation both have adaptive effects but do not eliminate differences between impact channels or significantly lower the dissipation time. Accounting for endogenous growth mechanisms increases the effects. We also find strong effects on income shares, important for distributional implications. This work fosters conceptual understanding of impact dynamics in growth models, opening options for links to empirics.
... In particular, including the climate cost components with respect to only the direct impacts implies describing the costs of climate change as a percentage of GDP without taking into account other dynamic effects. When introducing the damage in a recursive way, the multiplicative effects due to economic interactions (indirect impacts) are also captured (Bosello et al. 2012a), with a wider effect on GDP due to sectoral and international adjustments (Eboli et al. 2010). ...
The UNFCCC Paris Agreement, entered into force on 4 November 2016, represents
a step forward in involving all countries in mitigation actions, even though it is
based on a voluntary approach and lacks the active participation of some major polluting
countries. The underinvestment in mitigation actions depends on market and
policy failures and the absence of price signals internalizing the economic losses
due to climatic damage. This contributes to underestimating potential benefits from
global action. In this paper we discuss how crucial is the assessment of the vulnerability
of a country to climate change in defining the threat and action strategies. A
dynamic climate-economy CGE model is developed that includes a monetary evaluation
of regional damages associated with climate change. By considering alternative
damage profiles, results show that internalizing climatic costs might change the
bargaining position of countries in climate negotiations. Consequently, damage costs
should be given greater importance when defining the implementation of a global
climate agreement.
... Computable General Equilibrium (CGE) models are increasingly used in the economic assessment of climate change impacts (see e.g. Darwin and Tol, 2001;Eboli et al., 2010;Ciscar et al., 2011;Bosello et al., 2012). These multi-sector, multi-country models describe how economic consequences of climate change spread internationally and intersectorally, and estimate the final GDP and welfare effects. ...
Marine ecological change is likely to have serious potential economic consequences for coastal economies all over the world. This article reviews the current literature on the economic impacts of marine ecological change, as well as a number of recent contributions to this literature carried out under the VECTORS project. We focus on three main types of change, namely invasive alien species; outbreak-forming species, such as jellyfish and toxic algae; and gradual changes in species distribution and productivity. The case studies available in the literature demonstrate that the impacts of invasions and outbreaks on fisheries, aquaculture, and tourism can potentially amount to several tens of millions of dollars each year in some regions. Moreover, stated preference studies suggest a substantial impact on coastal tourism and non-use values that is likely not visible in case studies of specific outbreak events. Climate-driven gradual changes in distribution and productivity of commercial fish stocks will have an impact on fisheries, although these impacts are likely to be overshadowed by much larger changes in prices of seafood and fuel.
... Under climate change, we incorporate the direct physical damages of sea level into TERM-China to evaluate the economic impacts of sea level rise. Following Eboli et al. (2010), the physical damages due to sea level rise in TERM-China are modeled as the shock to industry capital stock in each coastal province. Specifically, we first calculate the percentage loss of cropland and construction land in each coastal region. ...
Among the climate change-induced threats to coastal regions, sea level rise is considered as the most serious one. Most large and prosperous cities in China are located along coastal regions and are thus likely to suffer huge economic impacts when a sea level rise occurs. The effects on coastal regions can also be transmitted to inland regions through movement of labor and trade, thus affecting regional disparity. To strengthen evidence-based policies of abatement and adaptation, it is essential to assess the economic impacts of sea level rise in addition to the physical impacts already investigated in the literature. Based on data from GIS analysis of flooded areas, this study uses a state-of-the-art technique (TERM-China, a multiregional general equilibrium model of China) to evaluate the economic impacts of sea level rise. The simulation results suggest that if the sea level rise coincides with sudden-onset extreme storm surges, the coastal regions' GDP loss would reach 11% in 2050, wherein Tianjin, Shanghai, and Jiangsu would have the most severe losses with over a 20% decline in their individual GDP in 2050. At the sectoral level, high capital-intensive sectors have more significant output losses. Our results also indicate that sea level rise could cause more unemployment in developed coastal regions, drive people to other developing inland regions, and even convert some mega-cities into middle-scale cities.
... A smaller strand of literature uses computable general equilibrium (CGE) models to examine the economic implications of climate change impacts with explicit causal links built into the models (e.g. Bosello, Roson, & Tol, 2006;Bosello, Eboli, & Pierfederici, 2012;Eboli, Parrado, & Roson, 2010;Roson and van der Mensbrugghe, 2012). The use of CGE models to explore water issues has been recently reviewed by Calzadilla, Rehdanz, Roson, Sartori, and Tol (2016). ...
In this paper we consider some of the economic implications of climate change scenarios as described in the Shared Socioeconomic Pathways (SSPs). By comparing potential water demand with estimates of (sustainable) water availability in different regions, we identify regions that are likely to be constrained in their future economic growth potential by the scarcity of water resources. We assess the macroeconomic impact of water scarcity under alternative allocation rules finding that, by assigning more water to sectors in which it has a higher value, shifting production to less water intensive sectors, and importing more water intensive goods, constrained regions can effectively neutralize these water related climate risks and adapt to a changing water environment. However, this adaptation effort is likely to imply some radical changes in water management policies.
... The Inter-temporal Computable Equilibrium System (ICES) model (Eboli et al. 2010) is at the core of our modelling framework (see Appendix I for more details). ICES is a recursive dynamic CGE model: a multi-market model linked to current real economy data observed in the benchmark year, based upon the merging of national social accounting matrices into a global economic database GTAP8 (Narayanan et al. 2012). ...
Economic costs of climate change are conventionally assessed at the aggregated global and national levels, while adaptation is local. When present, regionalised assessments are confined to direct damages, hindered by both data and models’ limitations. This article goes beyond the aggregated analysis to explore direct and indirect economic consequences of sea level rise (SLR) at regional and sectoral levels in Europe. Using a dynamic computable general equilibrium model and novel datasets, we estimate the distribution of losses and gains across regions and sectors. A comparison of a high-end scenario against a no-climate-impact baseline suggests a GDP loss of 1.26% (€871.8 billion) for the whole EU&UK. Conversely our refined assessments show that some coastal regions lose 9.56–20.84% of GDP, revealing striking regional disparities. Inland regions grow due to the displaced demand from coastal areas, but the GDP gains are small (0–1.13%). While recovery benefits the construction sector, public services and industry face significant downturns. We show that prioritising recovery of critical sectors locally reduces massive regional GDP losses, at negligible costs to the overall European economy. Our analysis traces regional economic restructuring triggered by SLR, underscoring the necessity of region-specific adaptation policies that embrace uneven geographic impacts and unique sectoral profiles to inform resilient strategy design.
While several economic studies have looked into the role of REDD in climate policy, the interlinks between climate policy, international trade and agricultural markets have been only marginally considered. This paper adds to that discussion by developing a policy simulation exercise in which REDD credits can be traded in an international carbon market using a recursive dynamic computable general equilibrium model. The model was extended to incorporate abatement cost curves of avoided deforestation from a partial equilibrium study, and to account for the corresponding induced effects on land and timber markets. We conclude that REDD may significantly reduce policy costs. A large number of REDD credits entering the carbon market would allow regions pertaining to the climate policy agreement to systematically emit above their targets. These results confirm that policy design may require limits to the use of REDD credits along with the creation of long-term incentives to promote a greener economy. Finally, when international competitiveness effects are taken into account, we show that the use of REDD as a means to foster developing countries’ participation in climate policy may not be sufficient.
The human society is moving towards a human catastrophe, and the cause of this is the economic growth of different countries of the world, and the increase in production and consumption of energy without considering environmental issues; thus, the whole of human society is in serious threat of extinction. Consequently, in the next 5 years, several countries shall become uninhabitable for human beings, and in the next 10 years, this catastrophe would affect most of human life and the world, as a whole. However, this is an issue that energy producers should also pay attention to because there is no longer a consumer for whom they can produce energy [1]. However, scientific studies have predicted and recorded adverse global climate change because of the increase in greenhouse gases. The current trend of energy consumption and global warming has threatened not only the economic and social welfare of the people but even human life. Unfortunately, the magnitude of the problem and the inability to solve the problem has led to a denial-like view of the problem! Moreover, the costliness of the earlier solutions has been presented, which causes recession and lack of economic growth in different countries, causes unacceptability and makes differences between developed and developing countries on how to implement the mentioned projects, and practically nothing is performed. This paper offers solutions that would not stop the economic growth but offer more time to all nations by reviving the environment to reform their energy production and consumption systems and reducing or stopping their greenhouse gas emissions. However, these solutions are called "Plan to Increase the Amount of Rainfalls". The project aims to provide the essential freshwater to carry out the green movement (rangeland and forestry) to deal with the global phenomenon of global warming.
Purpose
Social development is the ultimate goal of every nation, and climate change is a major stumbling block. Climate Risk Index has documented several climate change events with their devastations in terms of lives lost and economic cost. This study aims to link the climate change and renewable energy with the social progress of extreme climate affected countries.
Design/methodology/approach
This research used the top 50 most climate-affected countries of the decade and estimated the impact of climate risk on social progress with moderation effects of renewable energy and technology. Several competing panel data models such as quantile regression, bootstrap quantile regression and feasible generalized least square are used to generate robust estimates.
Findings
The results confirm that climate hazards obstruct socioeconomic progress, but renewable energy and technology can help to mitigate the repercussion. Moreover, improved institutions enhance the social progress of nations.
Research limitations/implications
Government should improve the institutional quality that enhances their performance in terms of Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption to increase social progress. In addition, society should use renewable energy instead of fossil fuels to avoid environmental degradation and health hazards. Innovation and technology also play an important role in social progress and living standards, so there should be free hand to private business research and development, encouraging research institutes and universities to come forward for innovation and research.
Practical implications
The ultimate goal of all human struggle is to have progress that facilitates human beings to uplift their living standard. One of the best measures that can tell us about a nation’s progress is Social Progress Index (SPI), and one of many factors that can abruptly change it is the climate; so this study is an attempt to link the relationship among these variables and also discuss the situation where the impact of climate can be reduced.
Social implications
Although social progress is an important concept of today’s economics discussion, relatively few studies are using the SPI to measure social well-being. Similarly, there is consensus about the impact of climate on people, government and crops but relatively less study about its overall impact on social progress, so this study attempts to fill the gap about the relationship between social progress and climate change.
Originality/value
The main contribution of this study is the solution for the impact of climate risk. Climate risk is not in human control, and we cannot eliminate it, but we can reduce the negative impacts of climate change. Moderator impact of renewable energy decreases the negative impact of climate change, so there is a need to use more renewable energy to mitigate the bad consequences of climate on social progress. Another moderator is technology; using technology will also mitigate the negative consequences of the climate, so there is a need to facilitate technological advancement.
La thèse modélise différents canaux macroéconomiques de transmission de la transition énergétique dans deux scénarios officiels sur le système énergétique français, selon différentes évolutions du prix des énergies et structures d’information des agents privés. Un modèle hybride associe un modèle en équilibre général dynamique et un modèle d’optimisation du système de production d’électricité. Il modélise notamment des ménages sous contraintes de liquidité, les services énergétiques produits par les biens durables des ménages, différents scénarios du prix des énergies, les effets d’une taxe carbone, et deux structures d’information selon que les agents anticipent ou non parfaitement le futur. Les résultats suggèrent l’importance de l’effet prix sur la consommation d’énergie par les agents (plutôt que l’augmentation des investissements de décarbonation du mix électrique), le rôle joué par les investissements dans les biens durables et en capital, les différences de comportement entre ménages ricardiens et non ricardiens. Les effets de la fiscalité carbone varient selon l’évolution du prix de l’énergie non-électrique ; si ses recettes sont redistribuées, elle ne lèse par forcément le bien-être des ménages dans le modèle. Si les agents anticipent le futur, la décarbonation est favorisée sans peser significativement sur la croissance. Pour atteindre la neutralité carbone, davantage d’efforts d’efficacité énergétique et en matière de transferts d’usage semblent nécessaires.
The ability of food systems to respond to climate change is both exciting and underappreciated. This chapter examines potential producer and consumer responses to climate change, their ability to mitigate otherwise negative effects on food security, and the role of public and private organizations in investing in adaptation when individual responses are inadequate. This research, on the other hand, attempted to delve into the literature on climate change and adaptation policies by looking into the relationship between climate change and food security, adaptation, and agriculture in developing countries, specifically Malaysia. It is necessary to address some important issues concerning climate change and food security in this chapter in order to gain a better understanding of adaptation concepts and climate change as they relate to food security. Many studies have highlighted the negative net impact of climate change on agriculture. Most studies have shown that Sub-Saharan Africa is one of the most vulnerable regions to climate change, with the majority of people reliant on climate-sensitive agricultural systems. According to a review of the literature on food security issues, food production alone would not be able to contribute to overall food security because food production is dependent on a variety of climatic conditions and factors. Many reports in particular define the negative effects based on forecasts for various time segments and suggest that the amount of rainfall is decreasing in trend and will continue to decrease in the future with some uncertainty regarding its amount. Although a mild rise in temperature (between 1 and 3 °C) may support food production in temperate regions, it may have a negative effect in tropical and seasonally dry areas. Furthermore, this study discovered a scarcity of studies on adaptive capacities in developing countries that represent the introduction of a certain level of adaptation alternative that can be used as a benchmark for measuring food security or food sustainability. Therefore, the aim of this chapter is to discuss the different climate change adaptive capacities and concerns for food sustainability particularly in Malaysian context.
Technological innovation reduces energy costs, accelerates energy transition, and is a key driver of economic growth. However, it has inconclusive effects on energy productivity, which is calculated as the ratio of economic output to energy consumption. In this study, we empirically investigated the effects of China's innovative city pilot policy (ICPP) on energy productivity using a difference-in-differences (DID) framework. The empirical findings revealed that in China, the implementation of the ICPP has led to an economically and statistically significant improvement in energy productivity and the magnitude of increase was estimated to be approximately 15% based on DID and matched DID analyses. We tested and confirmed the robustness of our results and conducted mechanism analysis to examine the three channels through which the ICPP exerts its effect on energy productivity, namely innovation quality, research and development expenditure, and innovation behavior.
Applied statistics in research have an important role to play in the collection, compilation, analysis and interpretation of the data. In view of the day to day rapid changes in the research spectrum, the scenario is becoming interesting for a researcher. A Model is defined as abstraction of real situations, which aim to give the empirical content to relationships of variable and their interpretation. Modeling techniques are very common in basic as well as multidisciplinary research. This paper discusses the modeling and regression techniques for specific circumstances. Regression analysis technique explains the importance of variables and amount of change in exogenous variables if explanatory variables change with one unit. In this paper also describes the multiple and limited dependent variables especially logistic regression
In previous chapters we have described applied general equilibrium analysis in practical terms. In this chapter we begin by presenting a succinct explanation of the history of general equilibrium and the theoretical underpinnings of this type of analysis and models. We then move on to report on actual empirical applications to give the reader a flavor of the potential of AGE modeling.
The degree to which human conditions and the natural environment are vulnerable to the potential effects of climate change is a key concern for governments and the environmental science community worldwide. This book from the Intergovernmental Panel on Climate Change (IPCC) provides the best available base of scientific information for policymakers and public use. The Regional Impacts of Climate Change: An Assessment of Vulnerability reviews state-of-the-art information on potential impacts of climate change for ecological systems, water supply, food production, coastal infrastructure, human health, and other resources for ten global regions. It also illustrates that the increasing costs of climate and climate variability, in terms of loss of human life and capital due to floods, storms, and droughts, are a result of the lack of adjustment and response in society's policies and use of resources. This book points to management options that would make many sectors more resilient to current variability in climate and thus help these sectors adapt to future changes in climate. This book will become the primary source of information on regional aspects of climate change for policymakers, the scientific community, and students.
[Ackermann, F., Stanton, E., 2008-this issue. A comment on economy-wide estimates of the implications of climate change: human health. Ecological Economics. doi:10.1016/j.ecolecon.2007.10.006] criticise our recent paper [Bosello, F., Roson, R., Tol, R.S.J., 2006. Economy-wide estimates of the implications of climate change: human health. Ecological Economics 58, 579-591] on different levels, calling it "mistaken" and "misleading". We welcome the opportunity to respond. The critique of [Ackermann, F., Stanton, E., 2008-this issue. A comment on economy-wide estimates of the implications of climate change: human health. Ecological Economics. doi:10.1016/j.ecolecon.2007.10.006] is either misdirected or incorrect.
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