The socio-economic impacts of climate change and climate policies have both dynamic and spatial components. With regards to the dynamics, significant climate change impacts are already occurring and a wealth of climate science centers are forecasting their evolution over time. Relatedly, the dynamics of optimal climate policy is central in economic policy analyses, depending on e.g., development, technical progress, and discounting preferences. Also, the heterogeneity of the impacts of climate change across different regions is well documented, being e.g., less concerning at northern than at southern latitudes. As a consequence, optimal climate policies depend on geography and must take account of e.g., endogenous (and costly) changes of the geographic distribution of economic activity. Also, risk sharing mechanisms across regions have a possibly relevant role in optimal climate policy. Finally, climate change has differential effects depending on the heterogeneity of the affected agents with respect to income, wealth, and other socioeconomic and demographic characteristics. The policy implications of these differential impacts are first order: if e.g., carbon taxes are regressive, a redistribution system might be required for political support.
To evaluate the economic cost of climate change, economists are relying on structural models which can be calibrated and/or taken to data and are consistent with the fundamentals of climate science. These models need to be extended to account for heterogeneity across regions, over time, and across heterogeneous agents.
This special issue of The Economic Journal aims to collect papers on this frontier of dynamic, spatial, heterogeneous agents’ models for the study of the impact of climate change and climate policies.
