Why economic dynamics matter in assessing climate change damages: Illustration on extreme events

Hallegate Stéphane, Hourcade Jean-Charles, Dumas Patrice. 2007. Why economic dynamics matter in assessing climate change damages: Illustration on extreme events. Ecological Economics, 62 (2) : 330-340.

Liste HCERES des revues (en SHS) : oui

Thème(s) HCERES des revues (en SHS) : Economie-gestion

Résumé : Extreme events are one of the main channels through which climate and socioeconomic systems interact, and it is likely that climate change will modify the probability distribution of the losses they generate. The long-term growth models used in climate change assessments, however, cannot capture the effects of such short-term shocks. To investigate this issue, a non-equilibrium dynamic model (NEDyM) is used to assess the macroeconomic consequences of extreme events. This exercise allowed us to define the economic amplification ratio, as the ratio of the overall production loss due to an event to its direct costs. This ratio could be used to improve the cost–benefit analysis of prevention measures. We found also that, unlike a Solow-like model, NEDyM exhibits a bifurcation in GDP losses: for each value of the capacity to fund reconstruction, GDP losses remain moderate if the intensity and frequency of extremes remain under a threshold value, beyond which GDP losses increase sharply. This bifurcation may partly explain why some poor countries that experience repeated natural disasters cannot develop. Applied to the specific issue of climate change, this model highlights the importance of short-term constraints in the assessment of long-term damages, and shows that changes in the distribution of extremes may entail significant GDP losses in absence of specific adaptation. It suggests, therefore, that to avoid inaccurately low assessments of damages, researchers must take into account the distribution of extremes instead of their average cost and make explicit assumptions on the organization of future economies.

Classification Agris : P40 - Météorologie et climatologie
000 - Autres thèmes
U10 - Informatique, mathématiques et statistiques
E14 - Économie et politique du développement

Champ stratégique Cirad : Axe 6 (2005-2013) - Agriculture, environnement, nature et sociétés

Auteurs et affiliations

• Hallegate Stéphane, CIRED (FRA)
• Hourcade Jean-Charles, CNRS (FRA)
• Dumas Patrice, Université Pierre et Marie Curie (FRA) ORCID: 0000-0002-3896-7589

Source : Cirad-Agritrop (https://agritrop.cirad.fr/577153/)

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