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Economic Damages from Climate Change: A Review of Modeling Approaches

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Abstract

This report eluciDates one aspect of economic IAMs: the damage function. Damage functions map environmental changes (primarily mean temperature increases) to economic impacts. This crucial step in the determination of SCC appears in very different form in the leading economic IAMs. Through sections 3, 4, and 5 we review, in turn, the damage functions of the Dynamic Integrated Model of Climate and the Economy (DICE), the Framework for Uncertainty, Negotiation and Distribution (FUND) and the Policy Analysis of the Greenhouse Effect (PAGE). Section 6 discusses some empirical, programmatic and conceptual limitations of these three IAMs. Section 7 concludes. We begin, however, by providing a brief elaboration on integrated assessment modelling practices used by the IPCC. Readers familiar with IAMs and the IPCC's recent work may wish to skip this review.

Suggested Citation

  • Anthony Bonen & Willi Semmler & Stephan Klasen, 2014. "Economic Damages from Climate Change: A Review of Modeling Approaches," SCEPA working paper series. 2014-3, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    • Handle: RePEc:epa:cepawp:2014-3
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    Cited by:

    1. Mathieu Guigourez, 2023. "10$ a ton of carbon ? The Stern-Nordhaus Controversy : Methodological and Ethical Issues," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04161930, HAL.
    2. Peter A. Lang & Kenneth B. Gregory, 2019. "Economic Impact of Energy Consumption Change Caused by Global Warming," Energies, MDPI, vol. 12(18), pages 1-29, September.
    3. Catalano, Michele & Forni, Lorenzo & Pezzolla, Emilia, 2020. "Climate-change adaptation: The role of fiscal policy," Resource and Energy Economics, Elsevier, vol. 59(C).
    4. Dafermos, Yannis & Nikolaidi, Maria, 2019. "Fiscal policy and ecological sustainability: a post-Keynesian perspective," Greenwich Papers in Political Economy 37777, University of Greenwich, Greenwich Political Economy Research Centre.
    5. Jinhua Zhao, 2022. "Aggregate emission intensity targets: Applications to the Paris Agreement," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1875-1897, October.
    6. Julia M. Puaschunder, 2022. "Science Diplomacy Index: Leadership and Responsibility to Act on Climate Change," Scientia Moralitas Journal, Scientia Moralitas, Research Institute, vol. 7(2), pages 11-30, December.
    7. Anthony Bonen & Mr. Prakash Loungani & Willi Semmler & Sebastian Koch, 2016. "Investing to Mitigate and Adapt to Climate Change: A Framework Model," IMF Working Papers 2016/164, International Monetary Fund.
    8. Yannis Dafermos & Maria Nikolaidi, 2019. "Fiscal policy and ecological sustainability," FMM Working Paper 52-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    9. Michael W. M. Roos, 2018. "Endogenous Economic Growth, Climate Change and Societal Values: A Conceptual Model," Computational Economics, Springer;Society for Computational Economics, vol. 52(3), pages 995-1028, October.

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    More about this item

    Keywords

    Environmental Economics; Climate Change; Social Cost of Carbon; Integrated Assessment Models;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • 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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