Coupled Climate-Economy-Ecology (CoCEB) Modeling: A Dynamic Approach

Abstract

The when and/or how improved environmental-performance leads to improved macroeconomic-performance under increasing likelihood of global-warming abatement are not well understood. We thus formulate a simple Stochastic Coupled Climate-Economy-Biosphere (CoCEB-S) model that is qualitatively oriented—it is constructed to account for the main global macroeconomic and climate facts and is designed, in particular, to offer insights toward sustainable climate policy formulation. The paper begins with climate, carbon-cycle, and biosphere modules. A detailed description of stylized long-run macroeconomic facts and the core framework for replicating them, along with an extension to include endogenous technological-change, endogenous population, and energy depletion is added. Climate affects economic activity through damage appearing in the macroeconomic structure. The results show that abatement delivers a win-win solution by ~2050. However, the non-business-as-usual mitigation measures are wrought with high unemployment rates. This paper therefore demonstrates that a sustainable climate policy should be reinforced with appropriate economic measures that restrain the threat for the employment market and the possible high income/wealth disparity.

Keywords: Integrated assessment, Energy-climate policy, Inclusive wealth index, Endogenous technology, Endogenous population, Energy depletion, Damage mitigation, Endogenous variability

JEL Classification: C65, Q33, Q44, Q54, Q57, Q58