Smoke is discharged from chimneys at a coal-fired power plant.

Publication Type

The macroeconomics of climate change: Starting points, tentative results, and a way forward

John Hassler (Stockholm University), Per Krusell (Stockholm University) and Conny Olovsson (Sveriges Riksbank)
Working Papers 24-8
Photo Credit: Reuters Marketplace


This paper provides scientific starting points for climate-economy modeling. The sensitivity of climate change to emissions of greenhouse gases is uncertain. The same is true about the long-run economic consequences of climate change. Therefore, the authors argue that traditional cost-benefit analyses including calculations of optimal carbon taxes are, and will remain, unconvincing. Climate-economic models are nevertheless useful for finding effective climate policies that are robust to different assumptions about these uncertainties. This paper outlines such a model. A key result is that a transition to climate neutrality can be implemented at an acceptably low cost. The authors discuss the policies required for this transition, compare climate policies in the European Union and the United States, and provide suggestions for future research.

Data Disclosure:

The data underlying this analysis can be downloaded here [zip].

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