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Climate policy vs. agricultural productivity shocks in a dynamic computable general equilibrium (CGE) modeling framework: The case of a developing economy

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  • Pradhan, Basanta K.
  • Ghosh, Joydeep

Abstract

The main objective of this paper is to compare the cost of climate policy consistent with the 2 °C global warming target (Paris Agreement target) with the cost of climate change induced agricultural productivity shocks, using a recursive dynamic CGE model for India. The social cost of carbon, in terms of loss in agriculture sector, is estimated to be about 2 percent of GDP, at zero rate of discount, under conservative forecasts of fall in agricultural productivity. In comparison, the cost of climate policy consistent with the Paris Agreement target of 2 °C is about 1 percent of GDP. Thus, there is a strong case for the adoption of ambitious climate policy in India, provided other countries also adhere to the same. Besides, revenues generated from the carbon tax and emission allowance could be a means to support the development and adoption of new energy and agricultural technologies, to increase social sector expenditure and to reduce abatement costs.

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  • Pradhan, Basanta K. & Ghosh, Joydeep, 2019. "Climate policy vs. agricultural productivity shocks in a dynamic computable general equilibrium (CGE) modeling framework: The case of a developing economy," Economic Modelling, Elsevier, vol. 77(C), pages 55-69.
    • Handle: RePEc:eee:ecmode:v:77:y:2019:i:c:p:55-69
    DOI: 10.1016/j.econmod.2018.05.019
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    Cited by:

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    3. Liu, Xianmei & Peng, Rui & Bai, Caiquan & Chi, Yuanying & Liu, Yuxiang, 2023. "Economic cost, energy transition, and pollutant mitigation: The effect of China's different mitigation pathways toward carbon neutrality," Energy, Elsevier, vol. 275(C).
    4. Botero García, Jesús Alonso & Hurtado, Alvaro & Montañez Herrera, Diego Fernando, 2021. "The productivity of the agricultural sector and its effects on economic growth: a CGE analysis," Conference papers 333318, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Pradhan, Basanta K. & Ghosh, Joydeep, 2021. "COVID-19 and the Paris Agreement target: A CGE analysis of alternative economic recovery scenarios for India," Energy Economics, Elsevier, vol. 103(C).
    6. Li, Xiaoyu & Yao, Xilong, 2020. "Can energy supply-side and demand-side policies for energy saving and emission reduction be synergistic?--- A simulated study on China's coal capacity cut and carbon tax," Energy Policy, Elsevier, vol. 138(C).
    7. Abeer Elshennawy & Dirk Willenbockel, 2021. "The Effect of a Carbon Tax on The Egyptian Economy: A General Equilibrium Analysis," Working Papers 1525, Economic Research Forum, revised 20 Dec 2021.
    8. Su, Chi Wei & Yue, Peiwen & Hou, Xinmeng & Dördüncü, Hazar, 2023. "Sustainable development through digital innovation: A new era for natural resource extraction and trade," Resources Policy, Elsevier, vol. 85(PB).
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    11. Maruf Rahman Maxim & Kerstin K. Zander, 2020. "Green Tax Reform in Australia in the Presence of Improved Environment-Induced Productivity Gain: Does It Offer Sustainable Recovery from a Post-COVID-19 Recession?," Sustainability, MDPI, vol. 12(16), pages 1-18, August.
    12. Flament, Guillaume, 2023. "Impact of the energy transition on long-term factor productivity," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 393-406.
    13. Chen, You-hua & Chen, Mei-xia & Mishra, Ashok K., 2020. "Subsidies under uncertainty: Modeling of input- and output-oriented policies," Economic Modelling, Elsevier, vol. 85(C), pages 39-56.
    14. Eissa, Mohamed Abdelaziz & Al Refai, Hisham & Chortareas, Georgios, 2025. "Climate policy uncertainty, geopolitical risk, oil volatility, and global food price volatility: A time-varying analysis," Economic Modelling, Elsevier, vol. 152(C).
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    Keywords

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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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