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Extreme climate events and economic impacts in China: A CGE analysis with a new damage function in IAM

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  • Zhang, Hailing
  • Liu, Changxin
  • Wang, Can

Abstract

Integrated assessment models (IAMs) have been widely used to assess the effect of climatic policy. They are used to combine economic activity with simple climatic systems. Coupling earth system models (ESMs) to a socioeconomic framework for scientific research on climate change impacts is a challenging task. The coupling mechanism for complicated climate information in ESMs and economic activities, particularly the effects of extreme climate events on economic activities of industrial sectors, needs to be further explored. Therefore, we constructed a new IAM named EMRICES-2021 and improved the key coupling technology of damage function by adding an economic impact mechanism of precipitation, and extreme climate events. Considering the dynamic persistence features of climatic impacts on industrial sectors, we embedded the new damage function into the Cobb-Douglas production function of a computable general equilibrium (CGE) model and simulated future climatic losses on industrial economic system. Results show that the new damage function could better simulate the sudden economic impacts of extreme climate events and volatilities of climatic losses than Nordhaus mode. The cumulative indirect losses caused by extreme weather far exceeded direct losses in RCP scenarios. Climatic economic losses on real estate, finance, wholesale and retail trade increased fastest.

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  • Zhang, Hailing & Liu, Changxin & Wang, Can, 2021. "Extreme climate events and economic impacts in China: A CGE analysis with a new damage function in IAM," Technological Forecasting and Social Change, Elsevier, vol. 169(C).
    • Handle: RePEc:eee:tefoso:v:169:y:2021:i:c:s0040162521001979
    DOI: 10.1016/j.techfore.2021.120765
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