Climate change and economic growth: computational experiments in adaptive economic modelling

This paper reports experiments on the possibility of formulating operational models of adaptive/evolutionary non-convex general equilibrium systems to be adoptable as a framework for social choice to implement a socially optimal growth and climate change program. To perform this task, this paper develops and implements a growth model which includes climate change and the adaptive process of endogenous technical progress in a new growth modelling non-convex framework named ADICE-ADAPTIVE as a framework for social choice and welfare optimisation in a knowledge economy. Literature in this area is not well developed and the present study has advanced knowledge in this field. A numerical implementation of an optimisation climate change and growth model with the adaptive processes of endogenous technical progress encounters difficulties of non-existence of an optimum solution. The feasible endogenous model results show an absolute reduction in GHG emissions and only a slower rise in GDP growth implying sustainability of social welfare both in economic and environmental terms. The present experiments show the limitations of climate change policies implied by known integrated climate change and economic growth optimisation models and the problems and prospects for formulating an optimal growth program in a knowledge economy including the climate sector. The findings of the study have implications for the need for and the possibility of optimal social choice and economic equilibrium in a non-convex intertemporal knowledge economy, taking into account the climate sector. Policy implications of the result emphasise research and development to foster technical progress which can have a positive effect on sustainability.