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Keywords:

  • Climate economics;
  • Integrated assessment models;
  • Development;
  • Equity

Abstract

The interaction of climate and development threatens to create a paradox: economic development could accelerate climate change, which in turn could block further development, locking the world into existing patterns of inequality as the natural environment deteriorates. The solution to this paradox is far from obvious. What analytical tools are needed to chart a path that leads toward sustainable, low-carbon economic development? This article reviews the implications for climate policy of the climate economics and development literature, focusing on three key areas of judgments and assumptions that are built into a number of leading climate-economics models: 1) the treatment of climate science, risk, and uncertainty in climate-economics models; 2) questions of abatement technologies and costs, including a focus on the cost effectiveness method of economic analysis; and 3) ethical issues surrounding the distribution of the costs of emission reductions and adaptation measures. The article concludes that since climate and development goals are inextricably linked, there is a need for a new economic analysis that can help interpret and guide the creation of an innovative, low-carbon path to economic development.