Global Climate Change and its Distributional Impacts Maurizio Bussolo, Rafael de Hoyos, Denis Medvedev and Dominique van der Mensbrugghe The World Bank “Future of the Global Economy” 11 th Annual Conference on Global Economic Analysis Helsinki, June, 2008

ENVISAGE: Model features Standard dynamic global CGE. Flexible aggregation (regions and sectors) and time frame GTAP-based base year including IEA-based energy demand and trade (MTOE) and estimates of CO 2 emissions by sector and fuel (shifting to 2004). Integrated climate module with links from emissions to radiative forcing to temperature change. Flexible energy demand system. Flexible emissions control—carbon taxes, caps, cap and trade, demand exemptions.

Energy demand nest Energy bundle Electric bundle Existing and alternative technologies Non-electric bundle Coal bundle Oil and gas bundle Coal and alternative technologies Oil bundleGas bundle Oil and alternative technologies Gas and alternative technologies

Three scenarios Baseline, or business-as-usual, with climate change damages Baseline without climate change damages. Global mitigation scenario—targetting 500 ppm concentration by 2050

Key baseline assumptions UN population forecast—labor force growth equated to growth of working age population (15-65). Savings rate driven by growth and youth and elderly dependency rates. Trend productivity in agriculture is exogenous (2.5% per annum), with temperature-based damage function. Productivity in manufacturing is higher than in services (2%). Productivity is calibrated through 2015 and then fixed. Autonomous energy efficiency improvement (AEEI) increases by 1% per annum (in all regions and sectors). Capital account is exogenous.

Source: Simulations with World Bank’s ENVISAGE model. Developing, right-axis Developing growth rate, left-axis High-income growth rate, left-axis Baseline GDP Developed, right-axis

Source: Simulations with World Bank’s ENVISAGE model. Developing, right-axis High-income, right-axis World growth rate, left-axis Baseline Emissions

Concentration, forcing and temperature Concentration Forcing Temperature

Impacts of Climate Change Real income, difference from baseline with no damage, trillions of 2001US$

Impacts of Climate Change Real income, perce nt difference from baseline with no damage in 2050

Climate change damages and food imports Perce nt difference in nominal food imports in 2050 relative to baseline

Percent reduction in emissions Perce nt reduction in CO 2 emissions relative to baseline in 2050 $93 per ton of carbon in 2050

Real income losses/gains from mitigation Perce nt change in real income relative to baseline in 2050 Climate change damages Mitigation

Global income distribution Note:BaU = baseline, BaUnd = baseline with no damages. Source: Simulations with World Bank’s GIDD model.

Note:BaU = baseline, BaUnd = baseline with no damages, GBL = global mitigation scenario. Source: Simulations with World Bank’s GIDD model. Climate change impacts on poverty

Source: Simulations with World Bank’s GIDD model. Growth incidence of climate damages and mitigation

Source: Simulations with World Bank’s GIDD model. Incidence of damages from climate change

Take away messages Standard SRES ‘worse case’ baseline scenarios are too optimistic Staying at 550 ppm will require a major effort Negative effects from climate change on agricultural output will be significant with income, trade and poverty impacts No major cost from ‘modest’ mitigation efforts Poor are hardest hit from climate change Caveats -- many