The OECD has been working on the economics of climate change and its policies since the late 1980s. Over all these years economic models and quantitative assessments have been used to inform policy makers of the costs, benefits and potential tradeoffs of climate change mitigation scenarios. Currently, the main environmental-economic modelling work of the OECD rests upon ENV-Linkages, a recursive dynamic neo-classical general equilibrium model (GE). This modelling work is aimed to assist governments in identifying least-cost policies or policy mixes to reduce greenhouse gas (GHG) emissions, and assesses the cost and impacts of possible post-2012 international frameworks, among other applications.

  ENV-Linkages model

The ENV-Linkages model is a recursive dynamic neo-classical general equilibrium model (GE). It is a global economic model built primarily on a database of national economies. In its current form, the model represents the world economy in 15 countries/regions, each with 22 economic sectors. Summary flyer (4 pp pdf).
The baseline projection describes an internally consistent set of trends of all economic and environmental variables of the model. The baseline assumes no new policies for the environmental issues addressed and thus provides a benchmark against which policy scenarios can be assessed.

 ENV-Growth model
The ENV-Growth model is a two-sector model that aims at projecting GDP and per capita income levels for all major economies in the world (currently more than 175 countries). The model is based on conditional convergence between countries in the main drivers of economic growth: labour, human capital, physical capital, natural resources and total factor productivity.
ENV-Growth is used in the construction on the so-called Shared Socioeconomic Pathways (SSPs) for climate change. Preliminary results of these projections are available at https://secure.iiasa.ac.at/web-apps/ene/SspDb. 

 Spotlight

 Recent Work and Publications

 OECD Environmental Outlook to 2050

The Environmental Outlook provides model-based future-oriented analyses of economic and environmental trends in the coming decades. The economic and environmental projections are made possible by combining the ENV-Linkages model at the OECD Environment Directorate with the comprehensive environmental modelling framework of the IMAGE (Integrated Model to Assess the Global Environment) suite of models run by the Netherlands Environmental Assessment Agency (PBL).

 More about the OECD Environmental Outlook to 2050 (2012)

 Fragmented Carbon Markets

• Towards Global Carbon Pricing: Direct and Indirect Linking of Carbon Markets, Environment Working Paper No. 20 (2011)

Emissions trading systems (ETS) can play a major role in a cost-effective climate policy framework. Both direct linking of ETSs and indirect linking through a common crediting mechanism can reduce costs of action.

 More about OECD Work on Carbon Markets

Fossil fuel subsidy reform

• Mitigation Potential of Removing Fossil Fuel Subsidies: A General Equilibrium Assessment, Economics Department Working Paper (2011)

This paper discusses the assumptions, data and both environmental and economic implications of removing fossil fuel subsidies, using the ENV-Linkages model.

• The Scope of Fossil-Fuel Subsidies in 2009 and a Roadmap for Phasing out Fossil-Fuel Subsidies: An IEA, OECD and World Bank Report (2010)

This paper presents selected elements of the OECD input to a Joint Report on fossil fuel subsidies prepared by the OECD, IEA, OPEC and World Bank, as requested by G20 Leaders in September 2009.

• The Trade Effects of Phasing Out Fossil-Fuel Consumption Subsidies (2011)

A companion paper about trade effects of these co-ordinated multilateral removal of fossil-fuel consumption subsidies is available as OECD Trade and Environment working Paper.

 More about OECD Work on Fossil Fuel Subsidies

Recent analytical work using the ENV-Linkages model development spans over a wide range of issues dealing with the interlinkages between environment and the economy:

• An Economic Projection to 2050: The OECD "ENV-Linkages" Model Baseline. Environ-ment Working Paper 41 (2011)

This paper describes possible future developments and is not a prediction of the future. Rather, it provides an internally consistent set of trends of all economic and environmental variables of the model. The baseline assumes no new policies for the environmental issues addressed and thus provides a benchmark against which policy scenarios can be assessed.

• Costs, Revenues and effectiveness of the Copenhagen Accord: Emission Pledges for 2020, Environment Working Paper 22 (2010) 

This analysis examines costs and effectiveness of these pledges, using the OECD’s ENV-Linkages computable general equilibrium model. Several scenarios are analysed to evaluate the impacts of the range of pledges, the use of offsets, and linking emission trading systems.

 Climate change mitigation policy and employment

The implementation of a green growth agenda may translate into deep changes in the labour market that extend far beyond the creation of what are often labelled as “green jobs”. While there are a number of opportunities associated with green growth, there are also costs associated with the transition.

• Employment Impacts of Climate Change Mitigation Policies in OECD: A General-Equilibrium Perspective, Environment Working Paper No. 32 (2011)

 More about Economics of Climate Change Mitigation 

 Major publication: 
The Economics of Climate Change Mitigation: Policies and Options for Global Action Beyond 2012 (2009)

Against the background of a projected doubling of world greenhouse gas emissions by mid-century, this book explores feasible ways to abate them at least cost. Through quantitative analysis, it addresses key climate policy issues.