Pricing Carbon to Contain Violence
19 Pages Posted: 26 Jun 2019
Date Written: March 23, 2017
Violence is destructive to social order, economic growth, and the human condition. The annual total cost of violence is estimated to be 11 percent of the world’s GDP. However, violence has rarely made its way into economic models. In the meantime, increasing scientific evidence points to an active link between climate change and the incidence of interpersonal and intergroup violence. This study connects the climate–economy and the climate–violence systems by putting forth a new method to internalize the costs of climate-induced violence in the established MERGE integrated assessment model. It finds that such internalization can double the optimal carbon price, a relationship that holds across different specifications regarding climate sensitivity, GDP growth rate, and the willingness to pay (WTP) to avoid nonmarket climate damages. Normatively, under the realistic assumption that the WTP is at 1 percent of regional income, the avoided costs from climate-induced violence in sub–Saharan Africa is modeled to reach 3.7 percent of the region’s GDP in 2200, a very significant figure for an area that is already riddled with underdevelopment and violence. The approach of this paper is a first for the modeling community, indicating directions for future research. For the policy community, this paper takes recent econometric findings to the next step toward understanding required for decisions.
Keywords: climate change, violence, carbon pricing, carbon externality
JEL Classification: P48, Q54
Suggested Citation: Suggested Citation