Effects of Climate Policy on the Economy: A Theoretical Perspective
The aspects which are relevant when assessing the economic and social compatibility are almost unlimited. Theoretical studies look at changes in the macroeconomic welfare. The topics examined in economic-policy analyses range from macroeconomic variables, regulatory frame conditions, income distribution, and structural change through to the conditions which can be derived with regard to social compatibility.
This section seeks to answer the question: due to which economic mechanism can the implementation of climate policy measures result in changes of the GDP and the number of jobs? Climate policy measures set off diverse adjustment reactions among individual companies and private households which precipitate as structural effects on a sectoral and regional level. The sum of these adjustment reactions and the subsequently caused impacts then result in changes of macroeconomic variables on the macroeconomic level. The various economic mechanisms describe which adjustment reactions and consequential effects are induced by climate policies. However, they are strongly influenced by the respective theoretical paradigm used. In line with the various schools of thought, price and cost effects, demand effects and innovation effects can be distinguished.
KeywordsGross Domestic Product Climate Policy Production Frontier Cost Curve Labour Intensity
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