Emerging evidence highlights the increasing risks of non-linearities and systemic changes caused by climate change. These include large-scale tipping points in the earth’s climate such as the disintegration of the Greenland and West Antarctic Ice Sheets, permafrost collapse, and the breakdown of the Atlantic Meridional Overturning Circulation among others.

Furthermore, policy changes towards a low-carbon economy could cause macroeconomic instability in case the transition is uncoordinated and abrupt, creating policy uncertainty for firms and households, thereby possibly leading to lower economic activity, fall in asset prices and decreased capital values.

Models that underpin most economic analyses of climate change rarely include the possibility of abrupt changes to the climate or economic systems. Nevertheless, such changes – hereafter referred to as climate and related tipping points – are arguably the most critical determinant of the optimal levels of policy effort.

18-19 October 2021 14:00-16:45 (CEST) | Virtual Meeting

Table of Contents

OBJECTIVES OF THE WORKSHOP

As part of the OECD Horizontal Project on Building Climate and Economic Resilience in the Transition to a Low-Carbon Economy, this two-day workshop aims to discuss the current state of scientific understanding surrounding abrupt changes to the climate and economic systems due to climate change. The workshop will convene leading experts to review the state of climate science and climate-economy modelling with a particular focus on climate and related tipping points.

How can existing models better assess the economic consequences of climate tipping points?

Given the high uncertainties, how can research make progress in better understanding climate emergencies and support policy makers in finding the best pathways towards a climate resilient low-carbon economy?

Can new modelling approaches be developed or can existing ones be better integrated in order to simultaneously take into account the risks from climate tipping points and those that might arise in the economic system?

AGENDA

DAY 1

14:00 – 14:05 Opening remarks, Rodolfo Lacy, Director of the Environment Directorate, OECD

14:05 – 15:00 1. CLIMATE TIPPING POINTS: THE STATE OF KNOWLEDGE

This session aims to provide an overview of the physical science that underpins climate tipping points and of their possible consequences on the economic system.

Chair: Laurence Boone, Chief Economist, OECD

Presentations:

  • The state of scientific knowledge on climate tipping points, Timothy M. Lenton, Director of the Global Systems Institute and Chair in Climate Change and Earth System Science, University of Exeter
  • Incorporating tipping points into policy analysis, Elizabeth Kopits, Senior Economist, National Center for Economic Analysis, US Environmental Protection Agency

15:00 – 16:45 2. MODELLING THE ECONOMIC CONSEQUENCES OF TIPPING POINTS IN THE CLIMATE SYSTEM

There is a long history of research at the interface of climate and economic systems. However, models so far have only had limited integration of the effects of climate tipping points on the economy. This session aims to look at the current state-of-the-art modelling of the economic consequences of climate tipping points to gain a better understanding of future risks, their scale and magnitude.

Chair: Shardul Agrawala, Head of Environment and Economy Integration Division, Environment Directorate, OECD

Presentations:

  • Economic impacts of tipping points in the climate system using a meta analytic integrated assessment model, Simon Dietz, Professor, Department of Geography and Environment, London School of Economics and Political Science
  • Economic implications of multiple interacting tipping points, Yongyang Cai, Associate Professor, Department of Agricultural, Environmental and Development Economics, Ohio State University
  • Implications of tipping points for optimal climate policy, Christian Traeger, Professor, Department of Economics, University of Oslo
  • Approaches to modelling the economic consequences of climate change tipping points, William Nordhaus, Sterling Professor of Economics, School of the Environment, Yale University

Q&A

DAY 2

14:00 – 15:45 3 MODELLING THE IMPACTS OF CLIMATE-RELATED TIPPING POINTS ON THE MACROECONOMY

Looking beyond the physical science basis and global economic impacts of climate-related tipping points, this session has as its objective to investigate the ways in which both large-scale shifts and incremental changes in the climate system can affect macroeconomic and financial stability. In addition, the effect of unanticipated changes in climate policies on the economy will also be further investigated.

Chair: Dave Turner, Head, Macroeconomic Analysis Division, Economics Department, OECD

Presentations:

  • Climate impacts, economic growth and financial instability, Michael Kiley, Deputy Director, Federal Reserve Board, Washington DC
  • Impacts of climate policies on the macro-economy, Jean Pisani-Ferry, Tommaso Padoa Schioppa chair at the European University Institute, Senior Fellow at Bruegel and NonResident Senior Fellow at the Peterson Institute for International Economics
  • Monetary policy implications of climate change, Sandra Batten, Senior Research Economist, Bank of England
  • Climate change, public debt and financial crises: an agent-based modelling analysis, Francesco Lamperti, Assistant Professor, Institute of Economics, Scuola Superiore Sant’Anna and Scientist at the RFF-CMCC European Institute on Economics and the Environment
    Q&A

15:45 – 16:40 4. IRREVERSIBLE CHANGE: TAKING STOCK AND THE WAY AHEAD

An expert panel discussion provides an opportunity for leading researchers to reflect on the broader implications of climate change and climate-related tipping points on the economy, as well as the state-of-the-art integration of such incremental and abrupt changes in economic models.

Chair: Elisa Lanzi, Senior Economist, Environment and Economy Integration Division, Environment Directorate, OECD

Panel discussion:

  • Karen Fisher-Vanden, Professor of Environmental and Resource Economics and Public Policy, and Director of the Institute for Sustainable Agricultural, Food, and Environmental Science (SAFES), Pennsylvania State University
  • Simon Dietz, Professor, Department of Geography and Environment, London School of Economics and Political Science
  • Francesco Lamperti, Assistant Professor, Institute of Economics, Scuola Superiore Sant’Anna and Scientist at the RFF-CMCC European Institute on Economics and the Environment
  • Rob Dellink, Senior Economist, Environment and Economy Integration Division, Environment Directorate, OECD
  • Valerio Nispi Landi, Economist, International Relations and Economics Directorate, Bank of Italy

16:40 – 16:45 Closing remarks

Speech by Simon Dietz

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Speech by Nordhaus