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

Author

Listed:
  • Yongyang Cai
  • William Brock
  • Anastasios Xepapadeas

Abstract

We develop a novel analysis of climate change and policy regarding climate damages to growth under regional cooperation or noncooperation. We introduce a new stylized climate module and compute the regional social cost of carbon (SCC) when climate change impacts the growth rate of regional GDP under cooperation and noncooperation between regions. We find that in the presence of climate damage to economic growth, the regional SCC is high in either a cooperative or a noncooperative world, implying that it is optimal for each region to choose stringent climate policies. Moreover, relative to cooperation, noncooperation reduces the GDP of countries in both high northern latitudes and the tropics, while the loss for developing countries in the tropics is especially significant. The welfare losses to the tropics are larger still in the absence of compensatory transfers from wealthier regions most responsible for climate change.

Suggested Citation

  • Yongyang Cai & William Brock & Anastasios Xepapadeas, 2023. "Climate Change Impact on Economic Growth: Regional Climate Policy under Cooperation and Noncooperation," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(3), pages 569-605.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/722274
    DOI: 10.1086/722274
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    Cited by:

    1. Ye, Huiying & Liao, Hua & Zheng, Guoliang & Peng, Ying, 2024. "Industrialization, environmental externality, and climate mitigation strategies," Economic Modelling, Elsevier, vol. 139(C).
    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, revised Jan 2026.
    3. Brock, William A. & Miller, J. Isaac, 2024. "Polar amplification in a moist energy balance model: A structural econometric approach to estimation and testing," Journal of Econometrics, Elsevier, vol. 245(1).
    4. Yongyang Cai & Anastasios Xepapadeas & Aart de Zeeuw, 2025. "Solving Nash Equilibria in Nonlinear Differential Games for Common-Pool Resources," Papers 2506.06646, arXiv.org.
    5. Wang, Fangzhi & Liao, Hua & Tol, Richard S.J., 2025. "Baumol’s climate disease," European Economic Review, Elsevier, vol. 180(C).
    6. 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.
    7. 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.
    8. Otto, Christian & Schult, Christoph & Vogt, Thomas, 2025. "Climate change economics in Vietnam: Redefining economic impact," IWH Discussion Papers 15/2025, Halle Institute for Economic Research (IWH).
    9. Deng, Huai & Wu, Xianhua & Xu, Hui & Zhang, Dawei, 2024. "Aggregated economic damages and the role of dynamic carbon tax under climate change: A dynamic general equilibrium model," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1099-1119.

    More about this item

    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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