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This chapter illustrates how economists have traditionally thought about decarbonisation. It notably provides an overview of the structure and key assumptions of Integrated Assessment Models, the main tool used by economists to model climate–economic interactions, with the aim of discussing their main policy lessons with regard to the macroeconomic implications of decarbonisation.
This chapter discusses a different analytical framework used by economists to understand the short-run effects of climate policy: Dynamic Stochastic General Equilibrium models. It presents recent empirical findings in this area and describes the main lessons learned from these models.
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