The Economics of Climate Change

32 Pages Posted: 21 Oct 2020

See all articles by Joseph Chi

Joseph Chi

Dimensional Fund Advisors

Mathieu Pellerin

Dimensional Fund Advisors

Jacobo Rodriguez

Dimensional Fund Advisors

Date Written: October 20, 2020

Abstract

This paper summarizes the economics of climate change. We first review the basics of climate science and the historical evolution of greenhouse gas emissions. We then discuss the relation between climate change and economics and assess the economic costs, direct and indirect, of climate change. These costs are uncertain and sensitive to the choice of discount rate, but overall, the expected costs are economically significant, and early mitigation efforts may be more cost-effective than later actions. We discuss the tradeoffs associated with different potential actions, such as carbon taxation and cap-and-trade programs. Finally, we examine the implications of climate change for asset pricing and investment choices.

Keywords: ESG, climate change, climate economics, social cost of carbon, sustainability

JEL Classification: G0, G12, Q5, Q54, Q55, Q56

Suggested Citation

Chi, Joseph and Pellerin, Mathieu and Rodriguez, Jacobo, The Economics of Climate Change (October 20, 2020). Available at SSRN: https://ssrn.com/abstract=3715848 or http://dx.doi.org/10.2139/ssrn.3715848

Joseph Chi

Dimensional Fund Advisors ( email )

1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
United States

Mathieu Pellerin

Dimensional Fund Advisors ( email )

6300 Bee Cave Road, Building One
Austin, TX 78746
United States

Jacobo Rodriguez (Contact Author)

Dimensional Fund Advisors ( email )

6300 Bee Cave Road, Building One
Austin, TX 78746
United States

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