Uncertainty of climate policies and implications for economics and finance: an evolutionary economics approach

Monasterolo, Irene, Roventini, Andrea and Foxon, Tim J (2019) Uncertainty of climate policies and implications for economics and finance: an evolutionary economics approach. Ecological Economics, 163. pp. 177-182. ISSN 0921-8009

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Abstract

The assessment of the socio-economic and financial impacts of climate change represents a main source of uncertainty for policy makers and investors. However, traditional climate economics and financial risk models are not properly equipped to consider the characteristics of climate risks and the opportunities from climate-alignment, being constrained by equilibrium conditions and linearity of impacts, as well as by representative agents and intertemporal optimization. Given the closing window of opportunity to achieve the 2 °C target, there is an urgent need for a new wave of models able to embrace uncertainty and complexity deriving not only from climate impacts on socio-economic systems, but also from their reaction. In this regard, approaches rooted on evolutionary economics and complexity science could provide complementary insights to traditional climate economics models. This special issue contributes to fill in this knowledge gap by collecting nine papers applying evolutionary and complex systems approaches, and agent-based and network models to climate change economics, presented at the Special Session of the Research Area “Environment-Economics Interactions” of the European Association of Evolutionary Political Economy (EAEPE)'s conference 2016. By introducing conceptual and methodological innovations in climate economics and finance, the nine articles analyse the conditions for effective climate policies and financial instruments to align countries to the global climate targets, compared to the costs of inaction. This information is crucial to support decision-makers in the analysis of climate-finance policies and instruments to foster the transition to a sustainable and inclusive low-carbon economy.

Item Type: Article
Keywords: climate policy, climate finance, evolutionary economics, agent-based models, complex systems, network models, uncertainty
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences > GE170 Environmental policy
H Social Sciences > HB Economic theory. Demography > HB0071 Economics as a science. Relation to other subjects
H Social Sciences > HG Finance > HG4501 Investment, capital formation, speculation
Depositing User: Timothy Foxon
Date Deposited: 10 Jun 2019 12:46
Last Modified: 01 Jul 2019 13:15
URI: http://sro.sussex.ac.uk/id/eprint/84182

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