Modelling the Impact of Climate Change and Policies on GDP
Climate change is becoming a central topic among economists, investors, politicians and the general public as well. Scientists warn us that we have to act immediately, but it is not that simple because becoming environmentally friendly is not cheap, and we are somewhat reluctant even though we have only one Earth. Moreover, while fighting climate change might be seen as a cost for developed economies, less developed economies frequently do not have many alternatives to fossil fuels.
A captivating insight to this topic offers a paper by Alestra et al. (2020) since the research provides a model to examine climate change scenarios for GDP forecasting, considering both GDP damage caused by the climate change itself and the impact of measures aimed to mitigate the climate change. It is crucial to emphasise that climate change endangers the economy. Therefore, even though fighting climate change can negatively affect the GDP, not acting might be even worse in the long run.