Comments on Climate Change, Development, Poverty and Economics by - - PowerPoint PPT Presentation

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Comments on Climate Change, Development, Poverty and Economics by - - PowerPoint PPT Presentation

Aug 13, 2023 37 likes •613 views

Comments on Climate Change, Development, Poverty and Economics by Sam Fankhauser and Nicolas Stern June 7, 2016 Gal Giraud Agence Franaise de Dloppement (AFD), Chief E. Chair Energy and Prosperity, Dir. Prof. Ecole Nationale des

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Comments on “Climate Change, Development, Poverty and Economics” by Sam Fankhauser and Nicolas Stern

June 7, 2016 Gaël Giraud Agence Française de Dloppement (AFD), Chief E. Chair Energy and Prosperity, Dir.

  • Prof. Ecole Nationale des Ponts et Chaussées
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Outlines

1

  • I. A call for action now

2

  • II. New Climate Macro?
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  • I. A call for action now

Strong warning: economic damage caused by global warming

might be considerably greater than current models predict.

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  • I. A call for action now

Strong warning: economic damage caused by global warming

might be considerably greater than current models predict.

⇒ more important than ever to take urgent and drastic action to

curb climate change by reducing carbon emissions

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  • I. A call for action now

Strong warning: economic damage caused by global warming

might be considerably greater than current models predict.

⇒ more important than ever to take urgent and drastic action to

curb climate change by reducing carbon emissions

“double inequity”. Cf. Shock Waves (WB report 2016).

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Figure : Physical vulnerability to Climate Change (Guillaumont, AFD)

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  • I. A call for action now

“Mitigation, adaptation and development are intertwined”

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  • I. A call for action now

“Mitigation, adaptation and development are intertwined” “The ‘horse-race’ between climate policy and development

represents a false dichotomy".

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  • I. A call for action now

“Mitigation, adaptation and development are intertwined” “The ‘horse-race’ between climate policy and development

represents a false dichotomy".

Systemic aspect of the SDGs.

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  • I. A call for action now

Urban planning in Porto Novo (Benin) or in the Phillipines [rising

  • f sea level].
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  • I. A call for action now

Urban planning in Porto Novo (Benin) or in the Phillipines [rising

  • f sea level].

Building the thermic solar plant of Ouarzazate (Morocco) [Clean

electrification]

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  • I. A call for action now

Urban planning in Porto Novo (Benin) or in the Phillipines [rising

  • f sea level].

Building the thermic solar plant of Ouarzazate (Morocco) [Clean

electrification]

Agro-ecological micro-projects in Zimbabwe [Clean agriculture]

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  • I. A call for action now

Urban planning in Porto Novo (Benin) or in the Phillipines [rising

  • f sea level].

Building the thermic solar plant of Ouarzazate (Morocco) [Clean

electrification]

Agro-ecological micro-projects in Zimbabwe [Clean agriculture] Sanitary programmes for children suffering from leptospirosis in

the “Barquita” slums (Santo-Domingo) [Adaptation to droughts and typhoons]

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  • I. A call for action now
  • For low-income countries, Adaptation should be the priority.
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  • I. A call for action now
  • For low-income countries, Adaptation should be the priority.
  • For emerging countries, Mitigation and Adaptation are equally

important. New Climate Economy Report.

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  • I. A call for action now
  • For low-income countries, Adaptation should be the priority.
  • For emerging countries, Mitigation and Adaptation are equally

important. New Climate Economy Report.

  • Funding strategies?

The Green Fund... Corridor of carbon prices (COP21).

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  • I. A call for action now
  • For low-income countries, Adaptation should be the priority.
  • For emerging countries, Mitigation and Adaptation are equally

important. New Climate Economy Report.

  • Funding strategies?

The Green Fund... Corridor of carbon prices (COP21).

  • IDFC has a specific role to play (possibly in connection with the

Green Fund).

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  • I. A call for action now
  • Canfin-Grandjean Report (2015).
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  • I. A call for action now
  • Canfin-Grandjean Report (2015).
  • Clever use of the public guarantee (Basu).
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  • I. A call for action now
  • Canfin-Grandjean Report (2015).
  • Clever use of the public guarantee (Basu).
  • Recycling (already existing) SDRs ? (Giraud, Grandjean, Leguet

(2015)).

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  • I. A call for action now
  • Canfin-Grandjean Report (2015).
  • Clever use of the public guarantee (Basu).
  • Recycling (already existing) SDRs ? (Giraud, Grandjean, Leguet

(2015)).

  • Green Securitization (ECB...?)

Climate Policy Initiative (CPI), I4CE.

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  • I. A call for action now
  • "This is why we call for a radical deepening of economic

analysis, including a development economics that begins to understand and incorporate climate change. Standard growth theory, general equilibrium and marginal methods will, as ever, have much to contribute but they will be nowhere near sufficient. This is about immense risks and radical change where time is of the essence. We should seek a dynamic economics where we tackle directly issues involving pace and scale of change in the context

  • f major and systemic risks."
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Outlines

1

  • I. A call for action now

2

  • II. New Climate Macro?
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  • II. New Climate Macro?

Modelling:

The macroeconomics: Non-linear Dynamical System with debt

dynamics.

The climate feed-back loop taken from Nordhaus’ DICE model

(2013).

Estimation

Calibration of the climate and public policy modules in line with

Norhdaus’ DICE model (2013).

Macroeconomic module estimation at the world level (panel

analysis for wider volatility).

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  • II. New Climate Macro?
  • GEMMES model (GEneral Monetary Macro-dynamics for the

Ecological Shift).

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  • II. New Climate Macro?
  • GEMMES model (GEneral Monetary Macro-dynamics for the

Ecological Shift).

  • Stock-flow Consistency

Grasselli and Costa-Lima (2012)...

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  • II. New Climate Macro?
  • GEMMES model (GEneral Monetary Macro-dynamics for the

Ecological Shift).

  • Stock-flow Consistency

Grasselli and Costa-Lima (2012)...

  • Public, private debt dynamics.

Debt-deflation (Krugman and Eggertson (2012)). Financial sector (Giraud and Kockerols (2016)).

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  • II. New Climate Macro?
  • GEMMES model (GEneral Monetary Macro-dynamics for the

Ecological Shift).

  • Stock-flow Consistency

Grasselli and Costa-Lima (2012)...

  • Public, private debt dynamics.

Debt-deflation (Krugman and Eggertson (2012)). Financial sector (Giraud and Kockerols (2016)).

  • Why is debt important for the issue at stake?
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  • II. New Climate Macro?
  • GEMMES model (GEneral Monetary Macro-dynamics for the

Ecological Shift).

  • Stock-flow Consistency

Grasselli and Costa-Lima (2012)...

  • Public, private debt dynamics.

Debt-deflation (Krugman and Eggertson (2012)). Financial sector (Giraud and Kockerols (2016)).

  • Why is debt important for the issue at stake?

today’s liquidity trap due to debt overhang.

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  • II. New Climate Macro?
  • GEMMES model (GEneral Monetary Macro-dynamics for the

Ecological Shift).

  • Stock-flow Consistency

Grasselli and Costa-Lima (2012)...

  • Public, private debt dynamics.

Debt-deflation (Krugman and Eggertson (2012)). Financial sector (Giraud and Kockerols (2016)).

  • Why is debt important for the issue at stake?

today’s liquidity trap due to debt overhang. the (possibly huge) cost of investment in green infrastructures.

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  • II. New Climate Macro?
  • GEMMES model (GEneral Monetary Macro-dynamics for the

Ecological Shift).

  • Stock-flow Consistency

Grasselli and Costa-Lima (2012)...

  • Public, private debt dynamics.

Debt-deflation (Krugman and Eggertson (2012)). Financial sector (Giraud and Kockerols (2016)).

  • Why is debt important for the issue at stake?

today’s liquidity trap due to debt overhang. the (possibly huge) cost of investment in green infrastructures.

  • Non-neutral money + leverage cycle (Genakoplos).
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  • II. New Climate Macro?
  • Endogenous monetary business cycles.
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  • II. New Climate Macro?
  • Endogenous monetary business cycles.
  • Multiple long-run equilibria.
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  • II. New Climate Macro?
  • Endogenous monetary business cycles.
  • Multiple long-run equilibria.
  • No Say’s law

Inventory dynamics.

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  • II. New Climate Macro?
  • Endogenous monetary business cycles.
  • Multiple long-run equilibria.
  • No Say’s law

Inventory dynamics.

  • Short-run Phillips curve (with delay) (Mankiw (2010)).
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  • II. New Climate Macro?
  • Endogenous monetary business cycles.
  • Multiple long-run equilibria.
  • No Say’s law

Inventory dynamics.

  • Short-run Phillips curve (with delay) (Mankiw (2010)).
  • No rational expectations.

Phenomenological viewpoint : aggregate investment, consumption, Phillips functions are empirically estimated.

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  • II. New Climate Macro?
  • Endogenous monetary business cycles.
  • Multiple long-run equilibria.
  • No Say’s law

Inventory dynamics.

  • Short-run Phillips curve (with delay) (Mankiw (2010)).
  • No rational expectations.

Phenomenological viewpoint : aggregate investment, consumption, Phillips functions are empirically estimated.

  • Link between inequality and inefficiency + Stiglitz “stylized facts" on

inequality. Giraud and Grasselli (2016).

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  • II. New Climate Macro?

Baseline Case - 1/2

0,005 0,01 0,015 0,02 0,025 0,03 0,035 0,04 0,045 0,6 0,65 0,7 0,75 0,8 0,85 0,9 0,95 1 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Employment Rate Inflation Rate (axis 2) 0,5 1 1,5 2 2,5 0,005 0,01 0,015 0,02 0,025 0,03 0,035 0,04 0,045 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Real Ouput Growth Labor Productivity Growth Population Growth Debt to Nominal GDP Ratio (axis 2) 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2 4 6 8 10 12 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Atmospheric Temperature Change in °C Damage to Real Output Ratio (axis 2) 1 2 3 4 5 6 7 1000 2000 3000 4000 5000 6000 7000

2010 2041 2072 2102 2133 2163 2194 2225 2253 2284

Real Output in $ 2010 Emissions per Capita in t CO2 (axis 2)

Figure : Exponential labor productivity growth (1.5% as in Nordhaus, 2013), quadratic damage (Nordhaus, 2013), sensitivity 2.9.

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  • II. New Climate Macro?

Baseline Case - 2/2

50 100 150 200 250 300 350 50 100 150 200 250 300 350 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 CO2 Atmospere in ppm Carbon Price 2005$ (axis 2)

Figure : Exponential labor productivity growth (1.5% as in Nordhaus, 2013), quadratic damage (Nordhaus, 2013), sensitivity 2.9.

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  • II. New Climate Macro?

Baseline Case - Key values

GDP Real Growth 2100 (wrt 2010) 462% t CO2 per capita (2050) 5.6 Temperature change in 2100 +4.95 ◦C Carbon price (ton of CO2 in $ 2005) 2.22 CO2 concentration 2100 732.8 ppm

Table : Key values of the simulation.

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  • II. New Climate Macro?

Degrowth - 1/2

  • 0,06
  • 0,04
  • 0,02

0,02 0,04 0,06 0,6 0,65 0,7 0,75 0,8 0,85 0,9 0,95 1 2010 2041 2072 2102 2133 2163 2194 Employment Rate Inflation Rate (axis 2) 1 2 3 4 5 6 7 8 9 10 0,01 0,02 0,03 0,04 0,05 2010 2041 2072 2102 2133 2163 2194 Real Ouput Growth Labor Productivity Growth Population Growth Debt to Nominal GDP Ratio (axis 2) 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 1 2 3 4 5 6 7 8 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Atmospheric Temperature Change in °C Damage to Real Output Ratio (axis 2) 1 2 3 4 5 6 7 50 100 150 200 250

2010 2041 2072 2102 2133 2163 2194

Real Output in $ 2010 Emissions per Capita in t CO2 (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015, Nature), quadratic damage (Nordhaus, 2013), sensitivity 2.9.

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  • II. New Climate Macro?

Degrowth - 2/2

50 100 150 200 250 300 350 20 40 60 80 100 120 140 160 180 200 2010 2041 2072 2102 2133 2163 2194 CO2 Atmospere in ppm Carbon Price 2005$ (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015), quadratic damage (Nordhaus, 2013), sensitivity 2.9.

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  • II. New Climate Macro?

Degrowth - Key values

GDP Real Growth 2100 (wrt 2010) 225% t CO2 per capita in 2050 5.9 Temperature change in 2100 +4.92 ◦C Carbon price (ton of CO2 in $ 2005) in 2050 2.22 CO2 concentration in 2100 681.5 ppm

Table : Key values of the simulation.

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  • II. New Climate Macro?

Collapse - 1/2

  • 0,06
  • 0,05
  • 0,04
  • 0,03
  • 0,02
  • 0,01

0,01 0,02 0,03 0,04 0,05 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2010 2024 2038 2052 2066 2080 2094 2108 Employment Rate Inflation Rate (axis 2) 1 2 3 4 5 6 7 8 9 10 0,01 0,02 0,03 0,04 0,05 Real Ouput Growth Labor Productivity Growth Population Growth Debt to Nominal GDP Ratio (axis 2)

  • 0,2

0,2 0,4 0,6 0,8 1 1 2 3 4 5 6 7 8 2010 2017 2024 2031 2038 2045 2052 2059 2066 2073 2080 2087 2094 2101 2108 2115 Atmospheric Temperature Change in °C Damage to Real Output Ratio (axis 2) 1 2 3 4 5 6 20 40 60 80 100 120 140 160 Real Output in $ 2010 Emissions per Capita in t CO2 (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015, Nature), polynomial damage (Dietz and Stern, 2015), sensitivity 2.9.

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  • II. New Climate Macro?

Collapse - 2/2

5 10 15 20 25 30 50 100 150 200 250 2010 2017 2024 2031 2038 2045 2052 2059 2066 2073 2080 2087 2094 2101 2108 2115 CO2 Atmospere in ppm Carbon Price 2005$ (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015, Nature), polynomial damage (Dietz and Stern, 2015), sensitivity 2.9.

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  • II. New Climate Macro?

Collapse - Key values

GDP Real Growth 2100 (wrt 2010) −34.65% t CO2 per capita 5.6 Temperature change in 2100 +4.62 ◦C Carbon price (ton of CO2 in $ 2005) 2.22 CO2 concentration 2100 575.3 ppm

Table : Key values of the simulation.

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  • II. New Climate Macro?

Collapse - Carbon Price - S=2.9 - 2/3

0,005 0,01 0,015 0,02 0,025 0,03 0,035 0,04 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Employment Rate Inflation Rate (axis 2) 1 2 3 4 5 6 7 8 9 10 0,01 0,02 0,03 0,04 0,05 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Real Ouput Growth Labor Productivity Growth Population Growth Debt to Nominal GDP Ratio (axis 2) 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 0,5 1 1,5 2 2,5 3 3,5 4 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Atmospheric Temperature Change in °C Damage to Real Output Ratio (axis 2) 1 2 3 4 5 6 100 200 300 400 500 600 700 800 900 1000

2010 2041 2072 2102 2133 2163 2194 2225 2253 2284

Real Output in $ 2010 Emissions per Capita in t CO2 (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015), polynomial damage (Dietz and Stern, 2015), sensitivity 2.9.

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  • II. New Climate Macro?

Collapse - Carbon Price - S=2.9 - 3/3

50 100 150 200 20 40 60 80 100 120 140 160 180 200 2010 2017 2024 2031 2038 2045 2052 2059 2066 2073 2080 2087 2094 2101 2108 2115 CO2 Atmospere in ppm Carbon Price 2005$ (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015) and a polynomial damage (Dietz and Stern, 2015), sensitivity 2.9.

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  • II. New Climate Macro?

Collapse - Carbon Price - S=2.9 - Key values

GDP Real Growth 2100 (wrt 2010) 316% t CO2 per capita in 2050 5.54 Temperature change in 2100 +3.21 ◦C Carbon price (ton of CO2 in $ 2005) in 2050 26 CO2 concentration 2100 641.2 ppm

Table : Key values of the simulation.

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  • II. New Climate Macro?

Collapse - Carbon Price - S=6 - 2/3

  • 0,06
  • 0,05
  • 0,04
  • 0,03
  • 0,02
  • 0,01

0,01 0,02 0,03 0,04 0,05 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2010 2024 2038 2052 2066 2080 2094 2108 Employment Rate Inflation Rate (axis 2) 1 2 3 4 5 6 7 8 9 10 0,01 0,02 0,03 0,04 0,05 Real Ouput Growth Labor Productivity Growth Population Growth Debt to Nominal GDP Ratio (axis 2) 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 1 2 3 4 5 6 Atmospheric Temperature Change in °C Damage to Real Output Ratio (axis 2) 1 2 3 4 5 6 100 200 300 400 500 600 700 800 900 1000 Real Output in $ 2010 Emissions per Capita in t CO2 (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015), polynomial damage (Dietz and Stern, 2015), sensitivity 6.

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  • II. New Climate Macro?

Collapse - Carbon Price - S=6 - 3/3

10 20 30 40 50 60 70 80 90 100 20 40 60 80 100 120 140 160 180 2010 2017 2024 2031 2038 2045 2052 2059 2066 2073 2080 2087 2094 2101 2108 2115 CO2 Atmospere in ppm Carbon Price 2005$ (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015), polynomial damage (Dietz and Stern, 2015), sensitivity 6.

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  • II. New Climate Macro?

Collapse - Carbon Price - S=6 - Key values

GDP Real Growth 2100 (wrt 2010) −9.1% t CO2 per capita in 2050 5.04 Temperature change in 2100 +4.45 ◦C Carbon price (ton of CO2 in $ 2005) in 2050 26 CO2 concentration 2100 549.6 ppm

Table : Key values of the simulation.

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  • II. New Climate Macro?

Collapse avoided - Carbon Price 2 - S=6 - 1/3

The following scenario includes the carbon price à la Dietz and Stern (2015) and a Weitzman damage, with a climate sensitivity of 6. Translated in $2005 t/CO2 price, the carbon value in 2015 is $74 and $306 in 2055. The collapse is avoided.

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  • II. New Climate Macro?

Collapse avoided- Carbon Price 2 - S=6 - 2/3

0,005 0,01 0,015 0,02 0,025 0,03 0,035 0,04 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Employment Rate Inflation Rate (axis 2) 1 2 3 4 5 6 7 8 9 10 0,01 0,02 0,03 0,04 0,05 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Real Ouput Growth Labor Productivity Growth Population Growth Debt to Nominal GDP Ratio (axis 2) 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 0,5 1 1,5 2 2,5 3 3,5 4 2010 2041 2072 2102 2133 2163 2194 2225 2253 2284 Atmospheric Temperature Change in °C Damage to Real Output Ratio (axis 2) 1 2 3 4 5 6 100 200 300 400 500 600 700 800 900 1000

2010 2041 2072 2102 2133 2163 2194 2225 2253 2284

Real Output in $ 2010 Emissions per Capita in t CO2 (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015), polynomial damage (Dietz and Stern, 2015), sensitivity 6.

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  • II. New Climate Macro?

Collapse avoided- Carbon Price 2 - S=6 - 3/3

500 1000 1500 2000 2500 20 40 60 80 100 120 140 2010 2017 2024 2031 2038 2045 2052 2059 2066 2073 2080 2087 2094 2101 2108 2115 CO2 Atmospere in ppm Carbon Price 2005$ (axis 2)

Figure : Endogenous labor productivity depending on temperature (Burke and al., 2015) and a polynomial damage (Dietz and Stern, 2015).

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  • II. New Climate Macro?

Collapse avoided- Carbon Price 2 - S=6 - Key values

GDP Real Growth 2100 (wrt 2010) 272% t CO2 per capita in 2050 0.70 Temperature change in 2100 +3.23 ◦C Carbon price (ton of CO2 in $ 2005) in 2050 256 CO2 concentration ppm in 2100 395.71 ppm

Table : Key values of the simulation.

According to this model, a carbon price near $(2005)938/tC is needed in 2050 to avoid the collapse.

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