Macroeconomic modelling for climate resilient economic development (CRED)
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Macroeconomic modelling for climate resilient economic development (CRED) bridges the gap between economic planning and climate adaptation policies. By assessing the long-term economic effects of climate risks and adaptation measures, the tool provides additional information for decisionmakers on how to prioritise investments in adaptation. Thus, decisionmakers can compare different adaptation options with a view to reduce economic risks from climate change. The tool allows to analyse economy-wide impacts (e.g. on GDP, employment) of (1) different climate hazards on the infrastructure sector and (2) different resilient infrastructure options as adaptation measures. If a country does not yet have a macroeconomic model of climate risks, GIZ’s CRED approach can be used to develop such a model or preferably expand existing national models.
Climate-sensitive macroeconomic modelling allows decisionmakers to assess climate change impacts on key economic indicators (such as GDP, employment or energy-related CO2 emissions), and estimate the effects of infrastructure adaptation measures to reduce the economic risk of climate hazards. The modelling allows to look at economy-wide and sectoral as well as direct and indirect impacts of climate hazards and adaptation measures. The long-term horizon covers 30 years and could be extended. Thereby infrastructure projects benefit from climate-sensitive risk assessments and evidence-based information on adaptation options. Instead of short-termed infrastructure adaptation, macroeconomic modelling enables transformative adaptation towards climate resilient economic development. As such it can inform national adaptation plans (NAPs), long-term low-emissions development strategies (LT-LEDS) as well as sectoral adaptation policies.
By integrating climate risks into macroeconomic modelling, economic planning and adaptation policies become more responsive towards those risks. Moreover, economy-wide impacts of adaptation measures become visible. As the tool can also provide information on impacts of climate hazards and adaptation measures on energy-related CO2 emissions co-benefits or trade-offs with mitigation action can be identified.