Climate Change Around the World

Anthony Smith and Per Krusell
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Anthony Smith: Yale University

No 1582, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: This paper builds a highly disaggregated, dynamic, general equilibrium model of interactions between the climate and the economy. The model consists of approximately 19,000 1-degree by 1-degree regions containing land. Regional climates (or average annual temperatures) respond differently to increases in the Earth's temperature, and regional productivity varies with regional temperature. Each region makes optimal consumption-savings decisions in response to its changing productivity in one of two extreme market structures: autarky and free capital mobility. The relationship between regional temperature and productivity has an inverse U-shape, calibrated so that the many-region model replicates estimates of aggregate global damages from climate change; the implied optimal temperature is approximately twelve degrees. The central result is that climate change affects regions very differently, with many regions gaining while others lose. Although a tax on carbon increases average welfare, there is a large disparity of views across regions, with both winners and losers. These findings depend very little on the structure of capital markets.

Date: 2017
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Climate Change Around the World (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1582

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