Abstract
A high degree of consensus exists in the climate sciences over the role that human interference with the atmosphere is playing in changing the climate. Following the Paris Agreement, a similar consensus exists in the policy community over the urgency of policy solutions to the climate problem. The context for climate policy is thus moving from agenda setting, which has now been mostly established, to impact assessment, in which we identify policy pathways to implement the Paris Agreement. Most integrated assessment models currently used to address the economic and technical feasibility of avoiding climate change are based on engineering perspectives with a normative systems optimisation philosophy, suitable for agenda setting, but unsuitable to assess the socio-economic impacts of realistic baskets of climate policies. Here, we introduce a fully descriptive, simulation-based integrated assessment model designed specifically to assess policies, formed by the combination of (1) a highly disaggregated macro-econometric simulation of the global economy based on time series regressions (E3ME), (2) a family of bottom-up evolutionary simulations of technology diffusion based on cross-sectional discrete choice models (FTT), and (3) a carbon cycle and atmosphere circulation model of intermediate complexity (GENIE). We use this combined model to create a detailed global and sectoral policy map and scenario that sets the economy on a pathway that achieves the goals of the Paris Agreement with >66% probability of not exceeding 2 °C of global warming. We propose a blueprint for a new role for integrated assessment models in this upcoming policy assessment context.
Highlights
We introduce the new integrated assessment model E3ME-FTT-GENIE, which is designed to tackle the question of environmental impact assessment with the most realistic policy definition currently available, while enabling policy-makers to explore macro-financial issues that may arise from the introduction of such policy
This contrasts with a Computable General Equilibrium (CGE) model in which Y is determined by a production function, C is derived through the macroeconomic identity (1), I is equated to savings, a fixed proportion of Y and technology is often exogenous
We apply the model here as an example by exploring the economic impacts of an elaborate bundle of policies aimed at generating a low-carbon transition that achieves the goals set by the Paris Agreement
Summary
December 2015 saw a historical moment for climate policy in which, for the first time, almost all countries of the world adopted a formal agreement to reduce emissions in order to limit global. In order to determine the impacts of specific policies, research must move from the agenda-setting stage to the actual impact assessment of policies. [13e15]), has focused primarily on total energy system cost, consumption loss and GDP loss as indicators to characterise the socioeconomic impacts This is insufficient, as policy-makers are increasingly requiring information on many other types of impact [16]. Most equilibrium models of the economy used to analyse climate policy have restrictive assumptions over the functioning of the financial sector such that their outcomes are almost entirely determined by a debatable assumption, that re-allocating finance for technological change to reduce emissions takes away investment from other productive sectors of the economy, which automatically leads to loss of GDP ([19], see [13] and references therein). We conclude with an outlook for future research in the field of integrated assessment modelling
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