Climate Change Impacts and Limited Market-Driven Adaptation

11 Pages Posted: 5 Oct 2014

See all articles by Francesco Bosello

Francesco Bosello

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

Ramiro Parrado

Fondazione Eni Enrico Mattei (FEEM); CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici; Ca Foscari University of Venice - SMCC Phd

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

Bosello, Francesco and Parrado, Ramiro and Parrado, Ramiro, Climate Change Impacts and Limited Market-Driven Adaptation (September 25, 2014). Review of Environment, Energy and Economics (Re3), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2504592

Francesco Bosello

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

Ramiro Parrado (Contact Author)

Fondazione Eni Enrico Mattei (FEEM) ( email )

Isola di San Giorgio Maggiore
Venezia, VE 30124
Italy

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

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Ca Foscari University of Venice - SMCC Phd ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

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