Economic models and frameworks to guide climate policy

Hepburn, Cameron, Ives, Matthew C., Loni, Sam, Mealy, Penny, Barbrook-Johnson, Pete, Farmer, J. Doyne, Stern, Nicholas and Stiglitz, Joseph (2025) Economic models and frameworks to guide climate policy. Oxford Review of Economic Policy. ISSN 0266-903X

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Abstract

Reaching net-zero emissions will involve a structural transformation of the global economy. The transition is complicated by deep uncertainty about the new economic configurations that will emerge, coordination challenges, and non-linear dynamics amidst shifting political winds, where nation states are actively intervening to gain comparative advantage in key technologies. Here, we consider key economic questions about the net-zero transition that are of interest to finance ministries, based on a recent survey. Specifically, this paper asks: ‘What is the most effective way economic models and frameworks can help guide policy, given the complexity and uncertainty involved?’ We suggest five general criteria that models and frameworks should meet, and provide some guidance on how to select the right model for the question at hand—there is no single model to rule them all. A range of examples are offered to illustrate how models can be used and abused in the provision of economic advice to policy-makers. We conclude by noting that there are several gaps in our collective modelling capability that remain to be addressed.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	Economics Grantham Research Institute
Subjects:	H Social Sciences > HB Economic Theory G Geography. Anthropology. Recreation > GE Environmental Sciences
JEL classification:	Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C63 - Computational Techniques C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C68 - Computable General Equilibrium Models
Date Deposited:	05 Aug 2025 08:15
Last Modified:	06 Aug 2025 09:24
URI:	http://eprints.lse.ac.uk/id/eprint/129031

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