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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. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2014-3, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  • Handle: RePEc:epa:cepawp:2014-3
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    File URL: http://www.economicpolicyresearch.org/images/docs/research/climate_change/IACC_DamageFunctions_FINAL_1.pdf
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    Cited by:

    1. Anthony Bonen & Prakash Loungani & Willi Semmler & Sebastian Koch, 2016. "Investing to Mitigate and Adapt to Climate Change; A Framework Model," IMF Working Papers 16/164, International Monetary Fund.
    2. Zhao, Jinhua, 2018. "Aggregate Emission Intensity Targets: Applications to the Paris Agreement," ADBI Working Papers 813, Asian Development Bank Institute.

    More about this item

    Keywords

    Environmental Economics; Climate Change; Social Cost of Carbon; Integrated Assessment Models;

    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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