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GTAP Resource #4636

"On the macro-economic impacts of climate change under informational failures"
by Ruixuan, Cao and Alex Gohin

Available assessments of the future economic impacts of the climate change are still highly divergent. Estimates of the average yearly welfare impact of the climate change range from an optimistic increase of the world GDP by 2.5 per cent to a pessimist decrease by as much as 20 per cent. Many modeling assumptions contribute to these different figures, such as the highly disputed discount rate used in standard Cost Benefit Analysis (CBA) to balance future impacts relative to current expenditures.
These economic assessments are now mostly performed within stochastic contexts. Indeed most first economic researches adopt determinist economic approaches and thus focus on the average consequences. However it has always been recognized that there are many unknowns on the different future sources of greenhouse gas (GHG), on the climate sensitivity to GHG changes or on the physical damages of some climate changes. Accordingly, many recent economic researches introduce stochastic dimensions in their framework.
We can distinguish three main stochastic approaches developed so far to assess the climate change issue. The first approach consists in performing sensitivity analysis of the modeling results to the values of some behavioral parameters, exogenous variables or scenario assumptions. This first approach includes all dynamic deterministic economic models where the behavior of economic agents does not acknowledge the presence of stochastic variables or where the economic agents are supposed to have perfect foresight. The majority of present economic researches can be gathered in this first simple approach.
The second and third approaches allow economic agents to optimize taking some of them into account. In the second approach, economic agents are supposed to have full information on the structural parameters and the stochastic variables. They furthermore have rational expectations. In the third approach, economic agents are supposed to have initially only incomple...

Resource Details (Export Citation) GTAP Keywords
Category: Other CGE Application
Status: Not published
Date: 2015
Version: final
Created: Ruixuan, C. (4/9/2015)
Updated: Ruixuan, C. (4/14/2015)
Visits: 929
- Calibration and parameter estimation
- Dynamic modeling
- Climate impacts
- Europe (Western)

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  File format GTAP Resource 4636  (199.8 KB)   Replicated: 0 time(s)

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