Climate Change Impacts and Limited Market-Driven Adaptation
11 Pages Posted: 5 Oct 2014
Date Written: September 25, 2014
Abstract
This article addresses one specific criticism that can be raised against economic climate change impact assessments conducted with Computable General Equilibrium (CGE) models: that of overly optimistic assumptions about markets’ ability to react to climate change induced shocks, i.e. market-driven adaptation. These models indeed usually assume frictionless and instantaneous adjustments to a new equilibrium. We demonstrate that these frictions could increase climate change costs from 0.64% to 0.87% of Gross World Product (GWP).
Keywords: Climate Change Costs, Adaptation, Computable General Equilibrium Models
JEL Classification: C68, Q54
Suggested Citation: Suggested Citation