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Climate policy and development: an economic analysis

This paper describes the use of the Climate and Regional Economics of Development (CRED) model to explore the interconnections between climate and development policy. CRED scenarios, based on high and low projections of climate damages, and high and low discount rates, are used to analyse the effects of varying levels of assistance to the poorest regions of the world. The authors find that climate and development choices are almost independent of each other, if the climate threat is seen as either very mild or very serious. The optimal climate policy is to do very little in the former case, and a lot in the latter case, regardless of development. In the latter case, however, assistance may be required for the poorest regions to respond to serious climate threats in the globally optimal manner. Under intermediate assumptions about the severity of climate risks, development policy plays a greater role.