Macroeconomics of Climate Change

The macroeconomics of climate change analyzes the reciprocal relationship between the climate system and the economy at an aggregate level. This field investigates how climate change impacts key macroeconomic variables like GDP, inflation, employment, and financial stability through both physical risks (e.g., damage from extreme weather) and transition risks (e.g., economic shifts from decarbonization). Conversely, it also examines how macroeconomic policy tools—such as fiscal measures like carbon taxes and green infrastructure spending, and monetary policies that account for climate-related financial risk—can be used to mitigate climate change, facilitate adaptation, and foster sustainable long-term economic growth.

1. Introduction to Climate-Economy Linkages
   1. Defining the Scope of Climate Macroeconomics
      1. Distinction from Microeconomics of Climate Change
      2. Historical Evolution of the Field
      3. Key Research Questions
      4. Interdisciplinary Nature of Climate Economics
   2. The Climate System as an Economic Asset
      1. Climate as a Public Good
      2. Ecosystem Services and Economic Value
      3. Natural Capital and Resource Constraints
      4. Planetary Boundaries Framework
   3. The Economy as a Driver of Climate Change
      1. Greenhouse Gas Emissions by Economic Sector
         1. Energy Production and Use
         2. Industry and Manufacturing
         3. Transportation
         4. Agriculture and Land Use
         5. Buildings and Construction
         6. Waste Management
      2. Economic Growth and Energy Consumption
         1. Energy Intensity of Growth
         2. Fossil Fuel Dependence
         3. Structural Change and Decarbonization
         4. Rebound Effects
   4. Fundamental Economic Concepts
      1. Externalities and Market Failure
         1. Negative Externalities of Emissions
         2. Social Cost vs. Private Cost
         3. Pigouvian Solutions
      2. Public Goods and the Tragedy of the Commons
         1. Non-excludability and Non-rivalry
         2. Overuse and Depletion of Shared Resources
         3. Collective Action Problems
      3. Stock-Flow Problems
         1. Flow of Emissions vs. Accumulation in Atmosphere
         2. Long-term Persistence of GHGs
         3. Carbon Budget Constraints
      4. Tipping Points and Irreversibility
         1. Nonlinear Climate Responses
         2. Irreversible Damages and Path Dependency
         3. Critical Thresholds