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

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  • Yongyang Cai
  • William Brock
  • Anastasios Xepapadeas

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.

Suggested Citation

  • Yongyang Cai & William Brock & Anastasios Xepapadeas, 2022. "Climate Change Impact on Economic Growth: Regional Climate Policy under Cooperation and Noncooperation," DEOS Working Papers 2214, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:2214
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    Cited by:

    1. Aluwani Tagwi, 2022. "The Impacts of Climate Change, Carbon Dioxide Emissions (CO 2 ) and Renewable Energy Consumption on Agricultural Economic Growth in South Africa: ARDL Approach," Sustainability, MDPI, vol. 14(24), pages 1-25, December.
    2. Yongyang Cai & Khyati Malik & Hyeseon Shin, 2023. "Dynamics of Global Emission Permit Prices and Regional Social Cost of Carbon under Noncooperation," Papers 2312.15563, arXiv.org.
    3. Anastasios Xepapadeas, 2022. "On the optimal management of environmental stock externalities," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 119(24), pages 2202679119-, June.
    4. Fangzhi Wang & Hua Liao & Richard S. J. Tol, 2023. "Baumol's Climate Disease," Papers 2312.00160, arXiv.org.

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    More about this item

    Keywords

    Integrated Assessment Model of climate and economy; spatial heat transport; regional social cost of carbon; carbon tax; Nash equilibrium; economic growth; climate feedbacks;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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