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DISTRIBUTIONAL CONSEQUENCES OF CLIMATE CHANGE IMPACTS ON RESIDENTIAL ENERGY DEMAND: TWO APPROACHES AND TWO COUNTRIES
Lorenza Campagnolo, RFF-CMCC European Institute on Economics and the Environment (EIEE) and CMCC – ECIP Division
Johannes Emmerling, RFF-CMCC European Institute on Economics and the Environment (EIEE), CMCC – SEME Division
Adjusting energy demand in response to climate change or weather variation is a common form of adaptation; what is scarcely analysed are the distributional consequences of this adaptive behaviour on household income distribution and welfare. This topic will be examined using two different methodologies in two very different countries.
The first approach relies on a recursive-dynamic general equilibrium model combined with a sequential arithmetic micro-simulation module and it evaluates the macroeconomic and distributional implications for Italian households and regions under climate change. Acknowledging the limitations of this methodology, it highlights the heterogeneous effect of climate warming across households and its implications on regional energy poverty.
The second approach uses microdata to develop a multi-household recursive-dynamic CGE model for India. Decile-specific households are directly represented inside the model. The amount of energy for adaptation in response to rising temperatures is an endogenous behaviour taking place at the household level. The analysis highlights the direct implications of changes in household energy expenditure on income distribution and other welfare indicators.