Climate Modeling for Macroeconomic Policy : A Case Study for Pakistan
As the effects of climate change become increasingly evident, the design and implementation of climate-aware policies have assumed a more central role in the macroeconomic policy debate. With this has come an increasing recognition of the importanc...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/undefined/747101632403308927/Climate-Modeling-for-Macroeconomic-Policy-A-Case-Study-for-Pakistan http://hdl.handle.net/10986/36307 |
| Summary: | As the effects of climate change become
increasingly evident, the design and implementation of
climate-aware policies have assumed a more central role in
the macroeconomic policy debate. With this has come an
increasing recognition of the importance of introducing
climate into the economic policy making tools used by
central economic policy making agencies (such as ministries
of finance and ministries of planning). This paper
integrates climate outcomes into a macro-structural model
for Pakistan, the kind of model that is suitable for use on
a regular basis by ministry staff. The model includes the
standard set of variables and economic logic that are
necessary for the kinds of forecasting, economic policy, and
budgetary planning analysis typically conducted by central
ministries. In addition to standard outputs (unemployment,
inflation, gross domestic product growth, and fiscal and
current accounts), the model generates climate outcomes
(tons of carbon emitted and economic and health damages due
to higher temperatures and pollution). These outcomes are
generated when specific climate policies such as mitigation
are analyzed, but also when other policies are analyzed that
might have unanticipated climate impacts. The paper
describes the changes made to the World Bank’s standard
macro structural model, MFMod, in integrated climate
outcomes, climate policies, and the economic impacts of
climate on Pakistan’s economy. Notably, carbon-tax scenarios
show that a $20 carbon tax can reduce emissions in Pakistan
by 36 percent by 2050. Gross domestic product impacts could
also be positive, if the revenues from the carbon tax were
used to reduce reliance on heavily distorting taxes. The
model also quantifies associated co-benefits from reduced
local air pollution and better health and productivity
outcomes. In the absence of action to restrain climate
change, the model suggests that increased temperatures and
rain variability could reduce output by as much as 10
percent compared with a scenario where global temperature
rises were minimized. |
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