Macrodynamics and climate: reformulation

Dynamique macro-économique et climat: une reformulation

Gaël Giraud () and Paul Valcke
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Gaël Giraud: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Paul Valcke: GEJP - Georgetown Environmental Justice Program [Washington] - GU - Georgetown University [Washington]

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Abstract: Abstract Designing policy for global warming requires an integrated analysis of the interplay between the economy and the environment. The consensus is growing that, despite their dominance in the economics literature and their influence in public discussion and policymaking, the methodology employed so far by most Integrated Assessment Models (iams) ‘rests on flawed foundations' (Stiglitz et al. 2016). This is particularly worrisome in the face of the immense risks and challenges of global warming and the radical changes in our economies that an effective response requires. This paper introduces an alternative paradigm, IDEE (Integrated Dynamics Environment-Economy), based on coupling a medium-size climate model with nonlinear, out-of-equilibrium, stock-flow-consistent macroeconomic dynamics in continuous time. IDEE allows for multiple economic steady states, endogeneous business cycles, endogenous growth, corporate default, and the short- and long-run assessment of various mitigation and adaptation policies. We argue that this approach is suitable for providing insights into managing the transition to net-zero emissions and coping with damages induced by the ecological crisis.

Keywords: climate change; extreme risk; market imperfections; climate policy; integrated assessment; stock-flow consistency (search for similar items in EconPapers)
Date: 2023-02-01
New Economics Papers: this item is included in nep-ene and nep-env
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Published in Oxford Open Economics, 2023, 2, ⟨10.1093/ooec/odad007⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-04872596

DOI: 10.1093/ooec/odad007

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