Perspectives of Economic Research on Climate Change

Outline

This report aimed at evaluating the status quo of international and national economic research on climate change. Based on this evaluation, promising avenues for future research in Germany were to be revealed. The report was based on an extensive literature review as well as expert statements. As a result, the following aspects had to be highlighted:

1. Climate research has a high societal responsibility. It is expected to provide relevant and applicable solutions and recommendations for decision makers in politics, business and administration as well as the public in general. Taking this into account, it has to be revised how suitable contributions of German economists are, and in which respect they could be strengthened.

2. Economic contributions have been hardly perceived in climate policy as they are often conducted on abstract levels, neglecting national, European and international institutions of climate policy. Social and natural sciences also have specific expectations regarding climate economics. In general, there is a need for integrative approaches. Moreover, the business sector is another important addressee of economic research on climate change.

3. Climate research involves climate change research (emission scenarios, climate impacts) and climate policy research (including mitigation, adaptation and climate system engineering) as well as several cross-cutting issues (integration, uncertainty, distribution, technological and social change). So far, economic research has particularly focussed on climate impacts, mitigation and technological change. Most noteworthy, the economic analysis of adaptation and climate system engineering could be strengthened.

4. Strengths of German economic research in climate change include climate impact assessment, the evaluation of policy instruments as well as the consideration of technological change. In contrast, research on target definition, adaptation and climate system engineering as well as on the cross-cutting issues of uncertainty and distribution is rather weak. The evaluation of research activities in the field of international agreements and the cross-cutting issue of integrative research reveals an ambiguous picture.

5. Three avenues should guide future research activities:
- strengthened integration of theory-based research and applied approaches (strengthening of empirical foundation, consideration of approaches of behavioural and institutional economics)
- strengthened integration of economic research and natural sciences, particularly within the IPCC, by choosing systematically issues and methodologies at the interface between both disciplines
- positioning of German research in international competition by strengthening strengths and developing new areas of research and niches.

6. The following areas should be strengthened or developed: (1) research on supply-side measures, climate technologies and adaptation, (2) applied research (climate protection as an international problem of coordination, distributional issues, conditions for implementation), (3) research at the interface between natural sciences, engineering and economics (risk-cost-analyses, analyses of vulnerability), (4) new integrative research approaches (integration of policy objectives, regional and sectoral integration).

7. Methodologically, existing approaches (general-equilibrium models, game theory, experimental economics) should be developed, and the empirical foundation of climate economics should be strengthened. In addition, new approaches – new institutional economics, behavioural economics and organizational theory – should be considered.