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Climate Change and Economic Growth: An Intertemporal General Equilibrium Analysis for Egypt

Author

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  • Elshennawy, Abeer
  • Robinson, Sherman
  • Willenbockel, Dirk
Abstract
Due to the high concentration of economic activity along the low-lying coastal zone of the Nile delta and its dependence on Nile river streamflow, Egypt's economy is highly exposed to adverse climate change. Adaptation planning requires a forward-looking assessment of climate change impacts on economic performance at economy-wide and sectoral level and a cost-benefit assessment of conceivable adaptation investments. This study develops a multisectoral intertemporal general equilibrium model with forward-looking agents, population growth and technical progress to analyse the long-run growth prospects of Egypt in a changing climate. Based on a review of existing estimates of climate change impacts on agricultural productivity, labor productivity and the potential losses due to sea-level rise for the country, the model is used to simulate the effects of climate change on aggregate consumption, investment and welfare up to 2050. Available cost estimates for adaptation investments are employed to explore adaptation strategies. On the methodological side, the present study overcomes the limitations of existing recursive-dynamic computable general models for climate change impact analysis by incorporating forward-looking expectations. Moreover, it extends the existing family of discrete-time intertemporal computable general equilibrium models to which our model belongs by incorporating population growth and technical progress. On the empirical side, the model is calibrated to a social accounting matrix that reflects the observed current structure of the Egyptian economy, and the climate change impact and adaptation scenarios are informed by a close review of existing quantitative estimates for the size order of impacts and the costs of adaptation measures. The simulation analysis suggests that in the absence of policy-led adaptation investments, real GDP towards the middle of the century will be nearly 10 percent lower than in a hypothetical baseline without climate change. A combination of adaptation measures, that include coastal protection investments for vulnerable sections along the low-lying Nile delta, support for changes in crop management practices and investments to raise irrigation efficiency, could reduce the GDP loss in 2050 to around 4 percent.

Suggested Citation

  • Elshennawy, Abeer & Robinson, Sherman & Willenbockel, Dirk, 2013. "Climate Change and Economic Growth: An Intertemporal General Equilibrium Analysis for Egypt," MPRA Paper 47703, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:47703
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    2. Somayeh Meyghani & Mahdi Khodaparast Mashhadi & Narges Salehnia, 2023. "Long-term effects of temperature and precipitation on economic growth of selected MENA region countries," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(7), pages 7325-7343, July.
    3. Santos, Cárliton Vieira dos & Oliveira, Aryeverton Fortes de & Filho, Joaquim Bento de Souza Ferreira, 2022. "Potential impacts of climate change on agriculture and the economy in different regions of Brazil," Revista de Economia e Sociologia Rural (RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 60(1), January.
    4. Garcia-Jorcano, Laura & Sanchis-Marco, Lidia, 2024. "Forecasting the effect of extreme sea-level rise on financial market risk," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 1-27.
    5. Mengzhen Zhao & Jason Kai Wei Lee & Tord Kjellstrom & Wenjia Cai, 2021. "Assessment of the economic impact of heat-related labor productivity loss: a systematic review," Climatic Change, Springer, vol. 167(1), pages 1-16, July.
    6. Tiago Sequeira & Liliana Reis (ed.), 2019. "Climate Change and Global Development," Contributions to Economics, Springer, number 978-3-030-02662-2, December.
    7. Abeer Elshennawy & Dirk Willenbockel, 2014. "Trade Liberalization and the Costs and Benefits of Informality an Intertemporal General Equilibrium Model for Egypt," Working Papers 888, Economic Research Forum, revised Dec 2014.
    8. Suleiman O. Mamman & Kazi Sohag & Attahir B. Abubakar, 2023. "Climate change and inclusive growth in Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2282869-228, October.
    9. Fragkos, Panagiotis & Tasios, Nikos & Paroussos, Leonidas & Capros, Pantelis & Tsani, Stella, 2017. "Energy system impacts and policy implications of the European Intended Nationally Determined Contribution and low-carbon pathway to 2050," Energy Policy, Elsevier, vol. 100(C), pages 216-226.
    10. Osman, Rehab & Ferrari, Emanuele & McDonald, Scott, 2019. "Is improving Nile water quality ‘fruitful’?," Ecological Economics, Elsevier, vol. 161(C), pages 20-31.
    11. Abid, Nabila & Ahmad, Fayyaz & Aftab, Junaid & Razzaq, Asif, 2023. "A blessing or a burden? Assessing the impact of Climate Change Mitigation efforts in Europe using Quantile Regression Models," Energy Policy, Elsevier, vol. 178(C).
    12. Abeer Elshennawy & Dirk Willenbockel, 2021. "The Effect of a Carbon Tax on The Egyptian Economy: A General Equilibrium Analysis," Working Papers 1525, Economic Research Forum, revised 20 Dec 2021.
    13. Day, Creina & Day, Garth, 2017. "Climate change, fossil fuel prices and depletion: The rationale for a falling export tax," Economic Modelling, Elsevier, vol. 63(C), pages 153-160.
    14. Mehdi Hafezi & Oz Sahin & Rodney A. Stewart & Brendan Mackey, 2018. "Creating a Novel Multi-Layered Integrative Climate Change Adaptation Planning Approach Using a Systematic Literature Review," Sustainability, MDPI, vol. 10(11), pages 1-30, November.

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    More about this item

    Keywords

    Climate change adaptation; Computable general equilibrium analysis; Dynamic CGE;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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