Endogenous Economic Structure, Climate Change, and the Optimal Abatement Path by Hua Liao, Huiying Ye
Professors Hua Liao and Huiying Ye from Beijing Institute of technology (CEEP-BIT) published the paper “Endogenous Economic Structure, Climate Change, and the Optimal Abatement Path” sharing focuses on the development of CCEDS (Coupled Climate and Economic Dynamics Model with Endogenous Structure) to determine long-term climate policy, which incorporates the economic structure into Nordhaus’s standard DICE model.
Abstract: “Economic structure determines climate change through striking different carbon emissions across sectors, while climate change impacts economic structure by the various level of sectoral damage. Therefore, it is essential to uncover and understand this inherent dynamic mutual feedback within IAM. CCEDS (Coupled Climate and Economic Dynamics model with Endogenous Structure) endogenizes economic structure in Nordhaus’s standard DICE model. Two basic macroeconomic sectors that vary in carbon intensity and suffer different damage from climate change are incorporated: one producing consumer goods, and another producing capital goods. Results show that mitigation efforts can become more effective for the economy as economic structure evolves and evokes future investment response, which will be determined not only by the normal intertemporal trade-off between present-day and future consumption, but also by another trade-off between high and low carbon-intensive goods.