Climate Economics

Climate Economics

Reports on the economics of climate change

MODELING economics and climate change





IPCC Reports

The Intergovernmental Panel on Climate Change (IPCC) has produced several reports where the economics literature on climate change is assessed. In the fourth and fifth IPCC assessments, the assessment of the economics literature is divided across two reports produced by IPCC Working Groups II and III.

HERE is the 2007 press release from UNEP:

IPCC confirms that cost-effective policies and technologies could greatly reduce global warming

A new assessment by the Intergovernmental Panel on Climate Change (IPCC) concludes that the world community could slow and then reduce global emissions of greenhouse gases (GHGs) over the next several decades by exploiting cost-effective policies and current and emerging technologies.

Based on the most up-to-date, peer-reviewed literature on emissions modelling, economics, policies and technologies, today's report reveals how governments, industry and the general public could together reduce the energy and carbon intensity of the global economy despite growing incomes and population levels.

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The Stern Review and Updates

The Stern Review on the Economics of Climate Change is a 700-page report released for the British government on October 30, 2006 by economist Nicholas Stern chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. The report discusses the effect of global warming on the world economy.

HERE is a report in the UK Guardian of subsequent analysis by Stern in 2008. The report says:

The author of an influential British government report arguing the world needed to spend just 1% of its wealth tackling climate change has warned that the cost of averting disaster has now doubled.

Lord Stern of Brentford made headlines in 2006 with a report that said countries needed to spend 1% of their GDP to stop greenhouse gases rising to dangerous levels. Failure to do this would lead to damage costing much more, the report warned - at least 5% and perhaps more than 20% of global GDP.

But speaking yesterday in London, Stern said evidence that climate change was happening faster than had been previously thought meant that emissions needed to be reduced even more sharply.

This meant the concentration of greenhouse gases in the atmosphere would have to be kept below 500 parts per million, said Stern. In 2006, he set a figure of 450-550ppm. "I now think the appropriate thing would be in the middle of that range," he said. "To get below 500ppm ... would cost around 2% of GDP."

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World Economic Forum Global Risks Report  



The World Economic Forum used its annual Global Risks report to urge policy leaders to step up efforts to tackle the three big dangers cited by a panel of 1,000 experts: severe income disparities, the indebted state of governments and rising greenhouse gas emissions. The report says (p20): "A climate-smart mindset incorporates climate change analysis into strategic and operational decision-making. It entails a search for synergies across climate change mitigation- and adaptation-related efforts where possible. Such a mindset needs to become an integral part of our urban planning, water- and food-security management, investment policy, and demographic policy development, among others."

Davos, Switzerland (World Economic Forum meeting location)

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REMI Report on Carbon Fee and Dividend - positive for the economy

From the Citizens Climate Lobby news release:

WASHINGTON, June 9, 2014 /PRNewswire/ -- As recent reports on the impact of climate change underscore the need to reduce greenhouse gas emissions, a new study finds that a tax on carbon can reduce those emissions while also adding jobs to the economy.

The study, conducted by Regional Economic Models, Inc., examined a tax on the carbon-dioxide content of fossil fuels. The tax would start at $10 per ton, increasing at $10 per ton each year. Revenue from the tax would be returned to households in equal shares as direct payments. Under this approach, the REMI study found that recycling the revenue back into the economy would add 2.1 million jobs over ten years. Improvements in air quality would save 13,000 lives a year. Emissions would decline by 33 percent.

"Detractors have said that a carbon tax will kill jobs," said Mark Reynolds, executive director of Citizens Climate Lobby, which commissioned the study. "The REMI study turns that assumption on its head."


Main points:

  • The Fee And Dividend returns money to households, who spend it, which has a positive economic effect
  • Consumer-centric industries tend to be more labor-intensive than the capital-intensive fossil fuel supply chain
  • The border adjustment helps American exporters maintain competitiveness on the world marketplace
  • The United States imports more and exports less but the Fee And Dividend is enough consumer spending that GDP stays positive

Ref: REMI author Scott Nystrom (private communication)

3-page summary of REMI report  (CCL Legislative Director Danny Richter)

REMI Model Summary

The full REMI study can be downloaded HERE 

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From the US Environmental Protection Agency EPA


Understanding the economic effects of greenhouse gas (GHG) emission reductions is essential to assessing climate change scenarios. EPA assesses the economic implications of policies to reduce the greenhouse gas intensity of the U.S. economy. These economy–wide analyses are complemented by studies in key areas of economic interaction in climate scenarios, including the mitigation of non–CO2 greenhouse gases, and carbon sequestration and land use change in the forestry and agriculture sector. Given the long time horizon of global greenhouse gas concentrations, EPA also analyzes long term climate scenarios.

EPA's Climate Economic Modeling


EPA uses a variety of economic models and analytical tools when conducting climate economic analyses.  Below is a list of the specific models used by EPA, categorized by model type: economy-wide models, mitigation models, integrated assessment models, and detailed sector models.  Each model has certain strengths that, when used alongside other models and analytical tools, can produce thorough analyses of climate change mitigation programs.

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The ADAGE Model

ADAGE MODEL (from Wayback Machine)

ADAGE is a dynamic computable general equilibrium (CGE) model capable of investigating economic policies at the international, national, U.S. regional, and U.S. state levels. CGE models such as ADAGE combine economic theory and empirical data to estimate policy effects, while accounting for all interactions among businesses and consumers.

Here is a picture of the ADAGE model:


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More Resources

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Carbon Productivity

HERE is a report entitled: The carbon productivity challenge: Curbing climate change and sustaining economic growth by McKinsey & Company.

Any successful program of action on climate change must support two objectives—stabilizing atmospheric greenhouse gases (GHGs) and maintaining economic growth. Research by the McKinsey Global Institute and McKinsey's Climate Change Initiative finds that reconciling these two objectives means that "carbon productivity," the amount of GDP produced per unit of carbon equivalents (CO2e) emitted, must increase dramatically.

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Contrarian / Industry Reports

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What's the picture at the top of the page? It's the EPA Climate Economics logo.


Last edit 09Dec2017


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