Macroeconomic modelling for climate resilient economic development (CRED)

Macroeconomic modelling for climate resilient economic development (CRED)

Organization

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)

Type(s) of Tool

Economic / Financial ValuationsAnalyses the economic/financial value and risks related to projects., Modelling ToolsSimulate economic, social, and physical systems to help planners optimize outcomes from different decisions., Impact AssessmentsEvaluate the impacts of assets or policies on the environment and local livelihoods.

Sector(s)

Tools applicable to all sectors

Lifecycle Phase(s)

Strategic PlanningPublic authorities identify the needs and long-term vision for infrastructure development., PrioritizationAuthorities decide which projects to realize and how to allocate resources., Project PlanningGeneral strategy for a project’s delivery is developed., FinanceDevelopers decide how to pay for their project.

Open Source

No

Country of Origin

Germany

Date of Development

2020

Version

2020

Description

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.

Tool Outcome

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.

Sustainability Criteria

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.

Case Studies

Georgia: National Report (https://www.giz.de/en/downloads/giz2022-en-supporting-climate-resilient-economic-development-georgia.pdf), Sectoral Brief Tourism and Infrastructure (https://www.giz.de/en/downloads/giz2021-en-georgia-sectoral-policy-brief-tourism-infrastructure.pdf) Kazakhstan: National Report (https://www.giz.de/en/downloads/giz2022-en-supporting-climate-resilient-economic-development-in-kazakhstan.pdf), Sectoral Brief Infrastructure (https://www.giz.de/en/downloads/kazakhstan-economy-wide-effects-of-adaptation-in-infrastructure.pdf), Sectoral Brief Energy (https://www.giz.de/en/downloads/kazakhstan-economy-wide-effects-of-adaptation-in-the-energy-sector.pdf)

Contact Information

Sebastian Homm sebastian.homm@giz.de +49 30 338424-595