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A new economics approach to modelling policies to achieve global 2020 targets for climate stabilisation

  • Terry Barker
  • Annela Anger
  • Unnada Chewpreecha
  • Hector Pollitt

This paper explores a Post Keynesian, ‘new economics’ approach to climate policy, assessing the opportunities for investment in accelerated decarbonisation of the global economy to 2020 following the Great Recession of 2008--2009. The risks associated with business-as-usual growth in greenhouse gas (GHG) concentrations in the atmosphere suggest that avoiding dangerous climate change will require that the world’s energy-economy system is transformed through switching to low-carbon technologies and lifestyles. Governments have agreed a target to hold the increase in temperatures above pre-industrial levels to at most 2°C and have offered reductions by 2020 in GHG emissions or the carbon-intensity of GDP. The effects of policies proposed to achieve pathways to 2020 towards this target are assessed using E3MG, an Energy-Environment-Economy (E3) Model at the Global level. E3MG is an annual simulation econometric model, estimated for 20 world regions over 1972--2006 adopting a new economics approach. Additional low-GHG investment of some 0.7% of GDP, with carbon pricing and other policies, is sufficient to achieve a pathway consistent with a medium chance of achieving the long-term target. GDP is above reference levels because decarbonisation reduces world oil prices and increases investment. Employment is some 0.9% above reference levels by 2020 and public finances are almost unaffected.

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Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 26 (2012)
Issue (Month): 2 (October)
Pages: 205-221

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Handle: RePEc:taf:irapec:v:26:y:2012:i:2:p:205-221
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