Assessing the Economic Impacts of Climate Change - An Updated CGE Point of View

29 Pages Posted: 15 Feb 2012

See all articles by Francesco Bosello

Francesco Bosello

University of Milan - Department of Economics, Business and Statistics; CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

Fabio Eboli

Fondazione Eni Enrico Mattei (FEEM); CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

Roberta Pierfederici

Fondazione Eni Enrico Mattei (FEEM), CMCC - Euro Mediterranean Centre for Climate Change

Date Written: February 14, 2012

Abstract

The present research describes a climate change integrated impact assessment exercise, whose economic evaluation is based on a CGE approach and modeling effort. Input to the CGE model comes from a wide although still partial set of up-to-date bottom-up impact studies. Estimates indicate that a temperature increase of 1.92°C compared to pre-industrial levels in 2050 could lead to global GDP losses of approximately 0.5% compared to a hypothetical scenario where no climate change is assumed to occur. Northern Europe is expected to benefit from the evaluated temperature increase ( 0.18%), while Southern and Eastern Europe are expected to suffer from the climate change scenario under analysis (-0.15% and -0.21% respectively). Most vulnerable countries are the less developed regions, such as South Asia, South-East Asia, North Africa and Sub-Saharan Africa. In these regions the most exposed sector is agriculture, and the impact on crop productivity is by far the most important source of damages. It is worth noting that the general equilibrium estimates tend to be lower, in absolute terms, than the bottom-up, partial equilibrium estimates. The difference is to be attributed to the effect of market-driven adaptation. This partly reduces the direct impacts of temperature increases, leading to lower damage estimates. Nonetheless these remain positive and substantive in some regions. Accordingly, market-driven adaptation cannot be the solution to the climate change problem.

Keywords: computable general equilibrium modeling, impact assessment, climate change

JEL Classification: C68, Q51, Q54

Suggested Citation

Bosello, Francesco and Eboli, Fabio and Pierfederici, Roberta, Assessing the Economic Impacts of Climate Change - An Updated CGE Point of View (February 14, 2012). FEEM Working Paper No. 2.2012, CMCC Research Paper No. 125, Available at SSRN: https://ssrn.com/abstract=2004966 or http://dx.doi.org/10.2139/ssrn.2004966

Francesco Bosello (Contact Author)

University of Milan - Department of Economics, Business and Statistics

Via Festa del Perdono, 7
Milan, 20122
Italy

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Fabio Eboli

Fondazione Eni Enrico Mattei (FEEM) ( email )

Corso Magenta 63
20123 Milan
Italy

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici ( email )

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Roberta Pierfederici

Fondazione Eni Enrico Mattei (FEEM), CMCC - Euro Mediterranean Centre for Climate Change ( email )

C.so Magenta 63
Milano, 20123
Italy

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