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The impact of climate change on the balanced growth equivalent: An application of FUND

journal contribution
posted on 2023-06-08, 11:05 authored by David Anthoff, Richard TolRichard Tol
The Stern Review added balanced growth equivalents (BGE) to the economic climate change research agenda. We first propose rigorous definitions of the BGE for multiple regions and under uncertainty. We show that the change in the BGE is independent of the assumed scenario of per capita income. For comparable welfare economic assumptions as the Stern Review, we calculate lower changes in BGE between a business as usual scenario and one without climate impacts with the model FUND than the Stern Review found with the model PAGE. We find that mitigation policies give even lower changes in BGE and argue that those policy choices should be the focus of the research effort rather than total damage estimates. According to our results, the current carbon tax should be below 55/tC. Sensitivity analyses show that the Stern Review chose parameters that imply high impact estimates. However, for regionally disaggregated welfare functions, we find changes in BGE that are significantly higher than the results from the Stern Review both for total damage as for policy analysis. With regional disaggregation and high risk aversion, we observe fat tails and with that very high welfare losses.

History

Publication status

  • Published

Journal

Environmental and Resource Economics

ISSN

0924-6460

Publisher

Springer Verlag

Issue

3

Volume

43

Page range

351-367

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-04-17

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