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Climate Change Impact on Economic Growth: Regional Climate Policy under Cooperation and Noncooperation

Yongyang Cai (), William Brock and Anastasios Xepapadeas ()

No 2214, DEOS Working Papers from Athens University of Economics and Business

Abstract: We compute regional social cost of carbon (SCC) in the face of climate change impact on the rate of growth of regional GDP under cooperation and noncooperation between regions with climate feedbacks and heat transfer present or missing. Climate damage to economic growth poses serious challenges for many countries, particularly in the tropic region. We find that in the presence of climate damage to economic growth, regional SCC is high in either a cooperative world or a noncooperative world, implying that it is optimal for each region to choose stringent climate policies. Moreover, relatively to cooperation, noncooperation reduces GDP of countries in both the high northern latitudes and the tropic region while the loss for the developing countries in the tropic region is significant. Our results are robust with different modeling of the climate impact.

Keywords: Integrated Assessment Model of climate and economy; spatial heat transport; regional social cost of carbon; carbon tax; Nash equilibrium; economic growth; climate feedbacks (search for similar items in EconPapers)
JEL-codes: Q54 Q58 (search for similar items in EconPapers)
Date: 2022-04-07
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
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