How delayed learning about climate uncertainty impacts decarbonization investment strategies

Climate economics

How delayed learning about climate uncertainty impacts decarbonization investment strategies

Project goal

Most state-of-the-art climate-economic models assume a frictionless economy as it pertains to greenhouse gas emissions abatement; this is to say, as soon as policymakers spend money on abating fossil fuel emissions, such emissions reductions manifest as soon as the check clears. In the real world, however, the economy possesses significant inertia that slows the deployment of new technologies, including fossil fuel abatement capital stocks, regardless on how much is spent by policymakers. This inertia generally calls for a more agressive near-term financial approach relative to the no intertia case, as there is a (often significant) time lag between spending and abatement. The goal of this project is to augment a model which captures economic inertia with a systematic treatement of climate unceratinty; we hypothesize that the effects of climate risk and economic inertia will compound, resulting in an ambitious, near-term financial strategy if the Paris Agreement temperature targets are to be met.

I am very pleased to have been hired as a short-term consultant at the World Bank Climate Change Group while this work is being completed!

Collaborators

Florent John McIsaac and Stephane Hallegatte.