Climate Change Feedback on Economic Growth: Explorations with a Dynamic General Equilibrium Model

by Fabio Eboli, Ramiro Parrado and Roberto Roson

Human-generated greenhouse gases depend on the level and emissions intensity of economic activity. Therefore, most climate change studies are based on models and scenarios of economic growth. Economic growth itself, however, is likely to be affected by climate change impacts. These impacts affect the economy in multiple and complex ways: changes in productivity, resource endowments, production and consumption patterns. We use a new dynamic, multi-regional Computable General Equilibrium (CGE) model of the world economy to answer the following questions: Will climatechange impacts significantly affect growth and wealth distribution in the world? Should forecasts of human induced greenhouse gases emissions be revised, once climate change impacts are taken into account? We found that, even though economic growth and emission paths do not change significantly at the global level, relevant differences exist at the regional and sectoral level. In particular, developing countries appear to suffer the most from climate change impacts.