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Climate Change through the Lens of Macroeconomic Modeling

Author

Listed:
  • Jésus Fernández-Villaverde
  • Kenneth T. Gillingham
  • Simon Scheidegger
  • Jesús Fernández-Villaverde
  • Kenneth Gillingham

Abstract

There is a rapidly advancing literature on the macroeconomics of climate change. This review focuses on developments in the construction and solution of structural integrated assessment models (IAMs), highlighting the marriage of state-of-the-art natural science with general equilibrium theory. We discuss challenges in solving dynamic stochastic IAMs with sharp nonlinearities, multiple regions, and multiple sources of risk. Key innovations in deep learning and other machine learning approaches overcome many computational challenges and enhance the accuracy and relevance of policy findings. We conclude with an overview of recent applications of IAMs and key policy insights.

Suggested Citation

  • Jésus Fernández-Villaverde & Kenneth T. Gillingham & Simon Scheidegger & Jesús Fernández-Villaverde & Kenneth Gillingham, 2024. "Climate Change through the Lens of Macroeconomic Modeling," CESifo Working Paper Series 11346, CESifo.
  • Handle: RePEc:ces:ceswps:_11346
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    References listed on IDEAS

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    1. Florian Egli & Bjarne Steffen & Tobias S. Schmidt, 2018. "A dynamic analysis of financing conditions for renewable energy technologies," Nature Energy, Nature, vol. 3(12), pages 1084-1092, December.
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    Cited by:

    1. Jean-Guillaume Sahuc & Gauthier Vermandel & Frank Smets, 2024. "The New Keynesian Climate Model," Working papers 977, Banque de France.
    2. Romain Fillon & Manuel Linsenmeier & Gernot Wagner, 2025. "Climate Shift Uncertainty and Economic Damages," CESifo Working Paper Series 12289, CESifo.
    3. repec:ecr:col037:81906 is not listed on IDEAS
    4. Caggese, Andrea & Chiavari, Andrea & Goraya, Sampreet & Villegas‑Sanchez, Carolina, 2025. "Climate change, firms and aggregate productivity," Research Bulletin, European Central Bank, vol. 132.
    5. Kaldorf, Matthias & Rottner, Matthias, 2024. "Climate Minsky Moments and endogenous financial crises," Discussion Papers 26/2024, Deutsche Bundesbank.
    6. Castellini, Marta & Castelli, Chiara & Gusperti, Camilla & Lupi, Veronica & Vergalli, Sergio, 2025. "Balancing climate policies and economic development in the Mediterranean countries," Energy Economics, Elsevier, vol. 145(C).
    7. Cabrales, Antonio & García, Manu & Ramos Muñoz, David & Sánchez, Angel, 2025. "The interactions of social norms about climate change: Science, institutions and economics," European Economic Review, Elsevier, vol. 178(C).
    8. Adrien Bilal & James H. Stock, 2025. "A Guide to Macroeconomics and Climate Change," NBER Working Papers 33567, National Bureau of Economic Research, Inc.

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    Keywords

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • 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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