In a recent report, the IMF tests its climate policy measures against research by CEGA-affiliated researchers Marshall Burke and Solomon Hsiang and CEGA Faculty Director Ted Miguel:
“The IMF’s climate chapter models a package of policy measures that it says would enable the world to get to net zero carbon emissions by mid-century. In addition to a carbon price starting at a modest $6 to $10 per ton, the package includes 80% subsidies for renewable energy production, a swathe of green public investments, compensation for households, and a supportive fiscal approach — that is, being prepared to load up on debt for the next decade. The IMF points out, reasonably enough, that we seem to be in a low-for-long interest rate environment.
Cleverly, the IMF tests its measures against those reductive cost/benefit models — both the old school modelling by William Nordhaus, which is notorious for downplaying the damage caused by climate change, and the newer methodology developed by Marshall Burke, Solomon Hsiang and Edward Miguel in 2015 that found up to a quarter of global GDP could be affected by 2100 if emissions aren’t cut. The IMF still concludes that its proposed measures are net beneficial throughout the rest of the century. Even using the model where climate action is most harmful to growth — Nordhaus’ — the IMF’s projections show only a slight drag on GDP from 2037 to 2050, before the longer term benefits kick in. Even this, the IMF authors say, would be negated by benefits from lower air pollution and reduced traffic.”
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