Complexity and the Economics of Climate Change: A Survey and a Look Forward
LEM Working Paper Series, 2016/29
36 Pages Posted: 12 Jul 2016
Date Written: July 08, 2016
We provide a survey of the micro and macroeconomics of climate change from a complexity science perspective and we discuss the challenges ahead for this line of research. We identify four areas of the literature where complex system models have already produced valuable insights: (i) coalition formation and climate negotiations, (ii) macroeconomic impacts of climate-related events, (iii) energy markets and (iv) diffusion of climate-friendly technologies. On each of these issues, accounting for heterogeneity, interactions and disequilibrium dynamics provides a complementary and novel perspective to one of standard equilibrium models. Furthermore, it highlights the potential economic benefits of mitigation and adaptation policies and the risk of under-estimating systemic climate change-related risks.
Keywords: Climate Change, Climate Policy, Climate Economics, Complex Systems, Agent-Based Models, Socio-Economic Networks
JEL Classification: C63, Q40, Q50, Q54
Suggested Citation: Suggested Citation