IDEAS home Printed from https://ideas.repec.org/a/eee/tefoso/v169y2021ics0040162521001979.html
   My bibliography  Save this article

Extreme climate events and economic impacts in China: A CGE analysis with a new damage function in IAM

Author

Listed:
  • Zhang, Hailing
  • Liu, Changxin
  • Wang, Can

Abstract

Integrated assessment models (IAMs) have been widely used to assess the effect of climatic policy. They are used to combine economic activity with simple climatic systems. Coupling earth system models (ESMs) to a socioeconomic framework for scientific research on climate change impacts is a challenging task. The coupling mechanism for complicated climate information in ESMs and economic activities, particularly the effects of extreme climate events on economic activities of industrial sectors, needs to be further explored. Therefore, we constructed a new IAM named EMRICES-2021 and improved the key coupling technology of damage function by adding an economic impact mechanism of precipitation, and extreme climate events. Considering the dynamic persistence features of climatic impacts on industrial sectors, we embedded the new damage function into the Cobb-Douglas production function of a computable general equilibrium (CGE) model and simulated future climatic losses on industrial economic system. Results show that the new damage function could better simulate the sudden economic impacts of extreme climate events and volatilities of climatic losses than Nordhaus mode. The cumulative indirect losses caused by extreme weather far exceeded direct losses in RCP scenarios. Climatic economic losses on real estate, finance, wholesale and retail trade increased fastest.

Suggested Citation

  • Zhang, Hailing & Liu, Changxin & Wang, Can, 2021. "Extreme climate events and economic impacts in China: A CGE analysis with a new damage function in IAM," Technological Forecasting and Social Change, Elsevier, vol. 169(C).
    • Handle: RePEc:eee:tefoso:v:169:y:2021:i:c:s0040162521001979
    DOI: 10.1016/j.techfore.2021.120765
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0040162521001979
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.techfore.2021.120765?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-937, July.
    2. Fankhauser, Samuel & S.J. Tol, Richard, 2005. "On climate change and economic growth," Resource and Energy Economics, Elsevier, vol. 27(1), pages 1-17, January.
    3. Richard S.J. Tol, 2011. "The Social Cost of Carbon," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 419-443, October.
    4. Liu, Yu & Tan, Xiu-Jie & Yu, Yang & Qi, Shao-Zhou, 2017. "Assessment of impacts of Hubei Pilot emission trading schemes in China – A CGE-analysis using TermCO2 model," Applied Energy, Elsevier, vol. 189(C), pages 762-769.
    5. Derek Lemoine & Christian Traeger, 2014. "Watch Your Step: Optimal Policy in a Tipping Climate," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 137-166, February.
    6. Zhang, Fan & Deng, Xiangzheng & Phillips, Fred & Fang, Chuanglin & Wang, Chao, 2020. "Impacts of industrial structure and technical progress on carbon emission intensity: Evidence from 281 cities in China," Technological Forecasting and Social Change, Elsevier, vol. 154(C).
    7. Aijun Hu & Wei Xie & Ning Li & Xuanhua Xu & Zhonghui Ji & Jidong Wu, 2014. "Analyzing regional economic impact and resilience: a case study on electricity outages caused by the 2008 snowstorms in southern China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 70(2), pages 1019-1030, January.
    8. Junichi Fujino, Rajesh Nair, Mikiko Kainuma, Toshihiko Masui and Yuzuru Matsuoka, 2006. "Multi-gas Mitigation Analysis on Stabilization Scenarios Using Aim Global Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 343-354.
    9. van Vuuren, Detlef P. & Weyant, John & de la Chesnaye, Francisco, 2006. "Multi-gas scenarios to stabilize radiative forcing," Energy Economics, Elsevier, vol. 28(1), pages 102-120, January.
    10. Changxin Liu & Hailing Zhang & Zheng Wang, 2019. "Study on the Functional Improvement of Economic Damage Assessment for the Integrated Assessment Model," Sustainability, MDPI, vol. 11(5), pages 1-18, February.
    11. Carlos Benavides & Luis Gonzales & Manuel Diaz & Rodrigo Fuentes & Gonzalo García & Rodrigo Palma-Behnke & Catalina Ravizza, 2015. "Correction: The Impact of a Carbon Tax on the Chilean Electricity Generation Sector," Energies, MDPI, vol. 8(6), pages 1-2, June.
    12. Nordhaus, William D & Yang, Zili, 1996. "A Regional Dynamic General-Equilibrium Model of Alternative Climate-Change Strategies," American Economic Review, American Economic Association, vol. 86(4), pages 741-765, September.
    13. Zhuang, Juzhong, 1996. "Estimating Distortions in the Chinese Economy: A General Equilibrium Approach," Economica, London School of Economics and Political Science, vol. 63(252), pages 543-568, November.
    14. Richard L. Revesz & Peter H. Howard & Kenneth Arrow & Lawrence H. Goulder & Robert E. Kopp & Michael A. Livermore & Michael Oppenheimer & Thomas Sterner, 2014. "Global warming: Improve economic models of climate change," Nature, Nature, vol. 508(7495), pages 173-175, April.
    15. Martin L. Weitzman, 2012. "GHG Targets as Insurance Against Catastrophic Climate Damages," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(2), pages 221-244, March.
    16. Richard Tol, 2012. "On the Uncertainty About the Total Economic Impact of Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(1), pages 97-116, September.
    17. Kopp, Robert E. & Mignone, Bryan K., 2012. "The US government's social cost of carbon estimates after their first two years: Pathways for improvement," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-41.
    18. Shilpa Rao and Keywan Riahi, 2006. "The Role of Non-CO2 Greenhouse Gases in Climate Change Mitigation: Long-term Scenarios for the 21st Century," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 177-200.
    19. Steven J. Smith and T.M.L. Wigley, 2006. "Multi-Gas Forcing Stabilization with Minicam," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 373-392.
    20. Nordhaus, William D., 1993. "Rolling the 'DICE': an optimal transition path for controlling greenhouse gases," Resource and Energy Economics, Elsevier, vol. 15(1), pages 27-50, March.
    21. William D. Nordhaus, 2012. "Economic Policy in the Face of Severe Tail Events," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(2), pages 197-219, March.
    22. Carlos Benavides & Luis Gonzales & Manuel Diaz & Rodrigo Fuentes & Gonzalo García & Rodrigo Palma-Behnke & Catalina Ravizza, 2015. "The Impact of a Carbon Tax on the Chilean Electricity Generation Sector," Energies, MDPI, vol. 8(4), pages 1-27, April.
    23. Yongxiu He & Yangyang Liu & Tian Xia & Min Du & Hongzhen Guo, 2014. "The Optimal Price Ratio of Typical Energy Sources in Beijing Based on the Computable General Equilibrium Model," Energies, MDPI, vol. 7(5), pages 1-24, April.
    24. John Reilly & Sergey Paltsev & Ken Strzepek & Noelle Selin & Yongxia Cai & Kyung-Min Nam & Erwan Monier & Stephanie Dutkiewicz & Jeffery Scott & Mort Webster & Andrei Sokolov, 2013. "Valuing climate impacts in integrated assessment models: the MIT IGSM," Climatic Change, Springer, vol. 117(3), pages 561-573, April.
    25. de Jong, Stefan P.L. & Wardenaar, Tjerk & Horlings, Edwin, 2016. "Exploring the promises of transdisciplinary research: A quantitative study of two climate research programmes," Research Policy, Elsevier, vol. 45(7), pages 1397-1409.
    26. Liu, Yu & Lu, Yingying, 2015. "The Economic impact of different carbon tax revenue recycling schemes in China: A model-based scenario analysis," Applied Energy, Elsevier, vol. 141(C), pages 96-105.
    27. Zhai, Fan & Hertel, Thomas, 2005. "Impacts of the Doha Development Agenda on China : the role of labor markets and complementary education reforms," Policy Research Working Paper Series 3702, The World Bank.
    28. Ackerman, Frank & Munitz, Charles, 2012. "Climate damages in the FUND model: A disaggregated analysis," Ecological Economics, Elsevier, vol. 77(C), pages 219-224.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicholas Ngepah & Charles Raoul Tchuinkam Djemo & Charles Shaaba Saba, 2022. "Forecasting the Economic Growth Impacts of Climate Change in South Africa in the 2030 and 2050 Horizons," Sustainability, MDPI, vol. 14(14), pages 1-18, July.
    2. Pan, Yuling & Dong, Feng, 2023. "Green finance policy coupling effect of fossil energy use rights trading and renewable energy certificates trading on low carbon economy: Taking China as an example," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 658-679.
    3. Jan Gaska, 2023. "Losses from Fluvial Floods in Poland over the 21st Century – Estimation Using the Productivity Costs Method," Economics of Disasters and Climate Change, Springer, vol. 7(3), pages 357-383, November.
    4. Ye, Liping, 2022. "The effect of climate news risk on uncertainties," Technological Forecasting and Social Change, Elsevier, vol. 178(C).
    5. Yao, Xilong & Wang, Hualing & Shao, Shuai & Li, Xiaoyu & Guo, Zhi, 2022. "“Booster” or “obstacle”: Can coal capacity cut policies moderate the resource curse effect? Evidence from Shanxi (China)," Resources Policy, Elsevier, vol. 75(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Havranek, Tomas & Irsova, Zuzana & Janda, Karel & Zilberman, David, 2015. "Selective reporting and the social cost of carbon," Energy Economics, Elsevier, vol. 51(C), pages 394-406.
    2. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    3. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    4. Changxin Liu & Hailing Zhang & Zheng Wang, 2019. "Study on the Functional Improvement of Economic Damage Assessment for the Integrated Assessment Model," Sustainability, MDPI, vol. 11(5), pages 1-18, February.
    5. Richard S.J. Tol, 2021. "Estimates of the social cost of carbon have not changed over time," Working Paper Series 0821, Department of Economics, University of Sussex Business School.
    6. Richard S. J. Tol, 2021. "Estimates of the social cost of carbon have increased over time," Papers 2105.03656, arXiv.org, revised Aug 2022.
    7. Simon Dietz & Nicholas Stern, 2014. "Endogenous growth, convexity of damages and climate risk: how Nordhaus� framework supports deep cuts in carbon emissions," GRI Working Papers 159, Grantham Research Institute on Climate Change and the Environment.
    8. Nicholas Stern, 2013. "The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 838-859, September.
    9. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.T., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," Ecological Economics, Elsevier, vol. 197(C).
    10. Ralph Hippe, 2015. "Why did the knowledge transition occur in the West and not in the East? ICT and the role of governments in Europe, East Asia and the Muslim world," GRI Working Papers 180, Grantham Research Institute on Climate Change and the Environment.
    11. Howard, Peter & Sterner, Thomas, 2014. "Loaded DICE: Refining the Meta-analysis Approach to Calibrating Climate Damage Functions," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169952, Agricultural and Applied Economics Association.
    12. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    13. Li, Wei & Jia, Zhijie, 2016. "The impact of emission trading scheme and the ratio of free quota: A dynamic recursive CGE model in China," Applied Energy, Elsevier, vol. 174(C), pages 1-14.
    14. Zhang, Hong & Jin, Gui & Zhang, Zhengyu, 2021. "Coupling system of carbon emission and social economy: A review," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    15. van den Bijgaart, Inge & Gerlagh, Reyer & Liski, Matti, 2016. "A simple formula for the social cost of carbon," Journal of Environmental Economics and Management, Elsevier, vol. 77(C), pages 75-94.
    16. Lamperti, F. & Dosi, G. & Napoletano, M. & Roventini, A. & Sapio, A., 2018. "Faraway, So Close: Coupled Climate and Economic Dynamics in an Agent-based Integrated Assessment Model," Ecological Economics, Elsevier, vol. 150(C), pages 315-339.
    17. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.t., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," LSE Research Online Documents on Economics 114941, London School of Economics and Political Science, LSE Library.
    18. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
    19. repec:hal:spmain:info:hdl:2441/4hs7liq1f49gh9chdf7r17gam6 is not listed on IDEAS
    20. van den Bijgaart, Inge & Gerlagh, Reyer & Liski, Matti, 2016. "A simple formula for the social cost of carbon," Journal of Environmental Economics and Management, Elsevier, vol. 77(C), pages 75-94.
    21. Lint Barrage, 2020. "Optimal Dynamic Carbon Taxes in a Climate–Economy Model with Distortionary Fiscal Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(1), pages 1-39.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:tefoso:v:169:y:2021:i:c:s0040162521001979. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.sciencedirect.com/science/journal/00401625 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.