OECD Technical Expert Workshop on Modelling the Impact on Circular Economy and Low Carbon Transitions of the Covid-19 Recovery Packages

1. Using insights from economics of
climate change modelling to map out
large-scale recovery packages
Valentina Bosetti
Bocconi University
RFF-CMCC European Institute on Economics and the Environment

2. Climate Integrated Assessment
Models
• Models integrating the economic and the
environmental systems
• Require high level of interdisciplinarity
• Typically solved numerically
• Come in very different forms (from CGE to
simulation models, from single to multiple agents,
from economic to natural systems focused)
• So far mostly used to study climate change
mitigation strategies
See (Bosetti, 2021) for a review

3. What can these models do
They can help us:
• Mapping out transition configurations

4. Emission pathways: 2oC and 1.5°
.
No Policy
NDC
2°C
1.5°C
Scenario
Luderer et al., 2019
Peak
in 2020
Steep
emissions
reduction
Carbon
neutrality Net CO2
removal
Model

5. What can these models do
They can help us:
• Mapping out transition configurations
• Figuring out what investments might be needed

6. Efficiency
Renewables
Elec. T&D, storage
Nuclear & CCS
Fossil Extraction
Fossil power
2 °C compared to baseline
investment
disinvestment
Whiskers = model ranges (n = 6) Bars = model means (n = 6)
Whiskers = model ranges (n = 6)
Global Investment Portfolios for 1.5°C
and 2°C
[average annual investments, 2016-2050]

7. What can these models do
They can help us:
• Mapping out transition configurations
• Figuring out what investments might be needed
• Highlighting potential conflicts with other
important factors affecting humans and
ecosystems welfare

8. Avoided deaths from better air
quality due to moderate climate
mitigation in 2030
Aleluia et al. 2021

9. What can these models do
They can help us:
• Mapping out transition configurations
• Figuring out what investments might be needed
• Highlighting potential conflicts with other
important factors affecting humans and
ecosystems welfare
• Accounting for the uncertainties that are
associated with complex and ever evolving
reality

10. Integrating uncertainty into public
energy research and development
decisions
Anadon, Baker, Bosetti 2017

11. What can these models do
They can help us:
• Mapping out transition configurations
• Figuring out what investments might be needed
• Highlighting potential conflicts with other
important factors affecting humans and
ecosystems welfare
• Accounting for the uncertainties that are
associated with complex and ever evolving
reality
• Accounting for different beliefs about the
flexibility of the system (Ensamble)

12. What needs improvement
• Adapting to and learning from rapid feedbacks
• Modeling short term fluctuations
• Modeling distributional impacts

13. What you should not expect
from these models
• WHICH CONFIGURATION TO PICK. Defining
what weights should be given to different
priorities, human groups, objectives
• WHAT THE BIG PICTURE CONFIGURATION
MEANS FOR THE LOCAL SCALE. Defining the
optimal decarbonization choice for a small
island.
• WHAT POLICIES WORK BETTER IN THE REAL
WORLD. Defining the combination of policy
instruments that induce the action that deliver
the chosen configuration

14. Valentina.bosetti@unibocconi.it
Thank you!