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GTAP Resource #6308

"CGE modelling of the net impact from Australia's transition to a low-carbon economy"
by Hodges, Cedric and David O'Callaghan

To date, most macroeconomic models and economic policy modelling is done on a ‘baseline’ that assumes economic growth will occur unhindered by the increasing emissions intensity of economic output.

Models inherently assume that as emissions grow, the economy grows, and everyone’s standard of living rises. We believe this viewpoint does not hold true in practice – particularly in the long-run – and therefore economic analysis and public policy making is informed through a dated theoretical framework.

Climate change impacts should not be imposed as a ‘scenario’ on the baseline – because in the absence of fundamental societal and economic shifts, it is the baseline.

To leave the economic impacts of a changing climate out of economic baselines and decision making misses a trick. The Network of Central Banks and Supervisors for Greening the Financial System (NGFS), made up of 69 central banks including the Reserve Bank of Australia (RBA), this year released guidance the need to solve for this exact issue (and many others). Understanding and accounting for the longer-term effects of climate change on productivity, potential output and economic growth is critical to knowing the path of growth, and the distribution of the impacts of disruption.

We have invested in developing an in-house Regional CGE Climate Integrated Assessment Model – which has been tested in Australian state jurisdictions – is a modelling method and policy analysis technique that seeks to ‘correct’ the typical business as usual baseline in modelling.

Resource Details (Export Citation) GTAP Keywords
Category: 2021 Conference Paper
Status: Published
By/In: Presented during the 24th Annual Conference on Global Economic Analysis (Virtual Conference); Deloitte Access Economics
Date: 2020
Version: 1
Created: Hodges, C. (4/15/2021)
Updated: Batta, G. (6/20/2021)
Visits: 526
- Dynamic modeling
- Climate change policy
- Climate impacts
- Oceania

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  File format Paper_ANCACFC.pdf  (7.1 MB)   Replicated: 3 time(s)
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