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The Impact of Climate Change on the Balanced-Growth-Equivalent: An Application of FUND. ESRI WP228, March 2008

Anthoff, David and Tol, Richard S.J. (2008) The Impact of Climate Change on the Balanced-Growth-Equivalent: An Application of FUND. ESRI WP228, March 2008. [Working Paper]

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    The Stern Review added balanced growth equivalences (BGE) to the economic climate change research agenda. We first propose rigorous definitions of the BGE for multiple regions and under uncertainty. We show that the change in the BGE is independent of the assumed scenario of per capita income. For comparable welfare economic assumptions as the Stern Review, we calculate lower changes in BGE between a business as usual scenario and one without climate impacts with the model FUND than the Stern Review found with the model PAGE. We find that optimal mitigation policies give even lower changes in BGE and argue that those policy choices should be the focus of the research effort rather than total damage estimates. Sensitivity analyses show that the Stern Review chose parameters that imply high impact estimates. However, for regionally disaggregated welfare functions, we find changes in BGE that are orders of magnitude higher than the results from the Stern Review, both for total damage as for optimal policy analysis. With regional disaggregation and high risk aversion, fat tails and with that very high welfare losses emerge.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > environmental policy (including international arena)
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Economic and Social Research Institute (ESRI), Dublin > ESRI Working Papers
    Depositing User: Alyssa McDonald
    Official EU Document: No
    Language: English
    Date Deposited: 13 Dec 2018 13:31
    Number of Pages: 48
    Last Modified: 13 Dec 2018 13:31

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