Using Genuine Savings for Climate Policy Evaluation with an Integrated Assessment Model

Climate policies can have impacts which show up in multiple sectors of the economy and which change consumption levels over time, besides the changes in emissions which such policies bring about. We show how the sustainability indicator Genuine Savings can be endogenised within a general equilibrium model and used a sa criterion for judging the impacts of such policies or growth scenarios. We combine life cycle analytical approaches with a multi-country macroeconomic model which includes the economic costs of emissions from economic activity, and impacts on biodiversity and net primary productivity. The model is used to calculate values for Genuine Savings, where the shadow prices used to measure the value of asset changes is derived from the model structure. Differences in Genuine Savings over different greenhouse emission scenarios are discussed, scenarios which also consider the effects of pricing impacts on other pollutants and on biodiversity, and the effects of changes in population and the rate of growth of productivity. A key result which emerges is the key role of the rate of technological change relative to the population growth rate, if wellbeing is to be sustained over the next 50 years.