Environmental Macroeconomics

J. Hassler, Per Krusell and A.A. Smith

Chapter Chapter 24 in Handbook of Macroeconomics, 2016, vol. 2, pp 1893-2008 from Elsevier

Abstract: We discuss climate change and resource scarcity from the perspective of macroeconomic modeling and quantitative evaluation. Our focus is on climate change: we build a very simple “integrated assessment model,†ie, a model that integrates the global economy and the climate in a unified framework. Such a model has three key modules: the climate, the carbon cycle, and the economy. We provide a description of how to build tractable and yet realistic modules of the climate and the carbon cycle. The baseline economic model, then, is static but has a macroeconomic structure, ie, it has the standard features of modern macroeconomic analysis. Thus, it is quantitatively specified and can be calibrated to obtain an approximate social cost of carbon. The static model is then used to illustrate a number of points that have been made in the broad literature on climate change. Our chapter begins, however, with a short discussion of resource scarcity—also from the perspective of standard macroeconomic modeling—offering a dynamic framework of analysis and stating the key challenges. Our last section combines resource scarcity and the integrated assessment setup within a fully dynamic general equilibrium model with uncertainty. That model delivers positive and normative quantitative implications and can be viewed as a platform for macroeconomic analysis of climate change and sustainability issues more broadly.

Keywords: Climate system; Climate change; Carbon cycle; Damages; Growth; Discounting; Externality; Pigou tax; H23; O4; Q01; Q3; Q4; Q54 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:macchp:v2-1893

DOI: 10.1016/bs.hesmac.2016.04.007

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