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Coping With Collapse: A Stock-Flow Consistent Monetary Macrodynamics of Global Warming

Emmanuel Bovari (), Gaël Giraud and Florent Mc Isaac
Authors registered in the RePEc Author Service: Florent John McIsaac ()

Ecological Economics, 2018, vol. 147, issue C, 383-398

Abstract: This paper presents a macroeconomic model that combines the economic impact of climate change with the pivotal role of private debt. Using a Stock-Flow Consistent approach based on the Lotka–Volterra logic, we couple its nonlinear monetary dynamics of underemployment and income distribution with abatement costs. A calibration of our model at the scale of the world economy enables us to simulate various planetary scenarios. Our findings are threefold: 1) the +2 °C target is already out of reach, absent negative emissions; 2) the long-term (resp. short-term) results of climate change on economic fundamentals may lead to severe economic consequences without the implementation (resp. in case of too rapid an application) of proactive climate policies. Global warming (resp. too fast transition) forces the private sector to leverage in order to compensate for output and capital losses (resp. to lower carbon emissions), thus endangering financial stability; 3) Implementing an adequate carbon price trajectory, as well as increasing the wage share, fostering employment, and reducing private debt make it easier to avoid unintended degrowth and to reach a +2.5 °C target.

Keywords: Ecological macroeconomics; Stock-flow consistent model; Climate change; Integrated assessment; Collapse; Debt (search for similar items in EconPapers)
JEL-codes: C51 D72 E12 O13 Q51 Q54 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:147:y:2018:i:c:p:383-398

DOI: 10.1016/j.ecolecon.2018.01.034

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