An Integrated Approach to the Modelling of the Economic Costs of a Climate Change Policy

Climate change is a long-term issue because of the long lifespan of greenhouse gases and the delayed response of the climate system. To reach a particular target in the future in terms of climate change, there can be several different emission paths. To determine if one path is more cost effective than another, we need to use an integrated-assessment (IA) approach. In this paper we combine the multi-sector multi-gas and multi-regional global economic model GTAPEL with the reduced form climate change model ICM to use in an integrated assessment approach to the estimation of the economic costs of climate change policies. We set, as an illustrative example, the target of reaching a radiative forcing level of around 6 w/m^2 in the year 2100 and then consider alternative emission paths which can reach this same target. In using the IA approach, we develop an alternative way to assign the ‘Global Warming Potential’ (GWP) weights to various greenhouse gases which can reflect dynamic and specific nature of these potentials depending on a particular climate change and economic scenario being considered. This is then compared with a conventional approach which simply uses the fixed GWP weights as recommended by the IPCC (Intergovernmental Panel on Climate Change). We found the results to be significantly different, and this has implications for the existing methods of measuring the economic costs of climate change policies.