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Tackling the Cost of Living Crisis

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CSR and Sustainability in Financial Services

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Integrated Assessment Models II

Integrated Assessment Models II

Amit Kara

30 years: Macroeconomist

In the sixth video of this series on the Macroeconomics of Climate Change, Amit outlines why IAMs have been and will remain the workhorse models for climate economics and policy analysis. In this video, Amit continues the discussion around IAMs and completes the model circle. He also discusses how these models can be used to justify climate action.

In the sixth video of this series on the Macroeconomics of Climate Change, Amit outlines why IAMs have been and will remain the workhorse models for climate economics and policy analysis. In this video, Amit continues the discussion around IAMs and completes the model circle. He also discusses how these models can be used to justify climate action.

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Integrated Assessment Models II

6 mins 39 secs

Key learning objectives:

  • Define Abatements Costs

  • Identify the last component of an IAM model

Overview:

IAMs have been and will remain the workhorse models for climate economics and policy analysis. The smaller ones tend to be good for cost-benefit analysis but they are less good on sectoral, regional and geographical differences. The larger ones tend to include all the complexities, but they tend to be less transparent. As is the case with all models, the answers will be driven by the judgements that the modeller makes in developing the model.

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Summary

What are Abatements Costs?

This model of the IAM incorporates specifications that capture the emissions control rate or the amount of emissions that balances the cost of lowering those emissions with the benefits to the economy of that reduction.  The model can include equations that link emissions with carbon taxes and estimate the cost of achieving a target reduction in emissions. This is important because the effort that we make to mitigate and adapt to climate change depends on the economic cost of climate change.

The present value of future losses is low if we allow for a high discount rate and vice versa. This difference can lead to very different conclusions on the effort that we need to make today to restrict emission levels.

What does the final component of an IAM model include?

Another key component of an IAM is a detailed structure of the economy. Depending on the scope of the model and its coverage, the structure will typically include all the major sectors of the economy and links between these sectors. The model tends to include an energy sector because of the importance of this sector in climate analysis and a typical model will also allow for technology options that drive levels of emissions, energy intensity, carbon capture rates etc.

We have the structure of the economy, the abatement measures and the technology assumptions in place. These and many other assumptions determine the amount of CO2 emissions and the speed at which CO2 accumulates in the atmosphere.

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Amit Kara

Amit Kara

Amit is Associate Research Director for Global Macroeconomic Analysis at NIESR. He is a macroeconomist with experience in central banking, investment banking, commercial banking and corporate credit rating. He has most recently worked at HSBC where he helped design the forward economic guidance input for IFRS 9. Amit is currently working on two substantial research projects related to the macroeconomic impact of climate change.

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