CGE Models of the Economic Impacts of Climate Change with a Case Study of the Caribbean

Computable General Equilibrium (CGE) models have become an integral part of numerical simulation models for the assessment of climate change impacts and policies. This chapter discusses the structure and the simulation methodology of CGE models aimed at assessing the economic impacts of climate change, but it does not consider applications of CGE modeling related to the implementation and effects of climate policies, such as green taxation. The modifications needed in the standard CGE framework to gauge the economic implications of climate change are discussed first. Subsequently, a taxonomy of different models found in the literature, in terms of their salient characteristics such as dynamics, expectations, integration with other models, etc., is proposed. By way of illustration, a specific simulation exercise, aimed at assessing the economic impacts of climate change on a set of Caribbean states, is presented.