Short answer


The economic costs and economic benefits of policy actions are not factored into En-ROADS at this time. Reducing the Deforestation slider or increasing the Transport Electrification slider, for example, will not make taking other actions in the simulator more or less difficult because they used up or generated funding.

However, actions in the simulator that lower temperature will increase economic growth because the economic damage function is factored into the Baseline Scenario of En-ROADS (read more about the damage function here). Conversely, actions that increase temperature—such as subsidizing natural gas or increasing deforestation—will reduce economic growth.



Long answer


The global economy in En-ROADS is not fully endogenous, meaning it is not completely modeled in En-ROADS.

There is too much uncertainty and fluctuation around the costs of the different approaches covered by En-ROADS, especially if considered at a global scale over the coming decades, that it would be difficult to accurately represent the sum of those costs in the model. This doesn't mean that GDP is not affected in reality; it just means we haven't modeled it. There is uncertainty about whether climate mitigation actions would have either a positive or a negative effect on GDP.

Economic growth in En-ROADS can be impacted in these ways:


  • Adjusting the Economic Growth slider will directly increase or decrease economic growth. See an example in En-ROADS.
  • Actions that lower temperature (e.g., increasing the carbon price, increasing transport energy efficiency, or planting trees) will increase economic growth by reducing the damage that temperature causes on the economy. See an example in En-ROADS.
  • In the Assumptions menu, turning off the damage function for the Current Scenario will prevent temperature from affecting economic growth. See an example in En-ROADS.


Climate damage function

Climate change is already having, and will continue to have, a negative impact on the economy. This can be modeled with a climate damage function. By default, En-ROADS includes an estimate of the economic impact of climate change in both the Baseline Scenario and the Current Scenario. This can be explored and changes in the Assumptions pane under Simulation > Assumptions > Economy: Economic impacts of climate change.

For more information, read this overview of the damage function in En-ROADS.


Revenue and costs of taxes and subsidies (including carbon price)


You can use the “Revenue & Cost from Taxes & Subsidies” graph under the Financial graphs to examine the revenue and costs generated by pricing mechanisms. See an example in En-ROADS. This is not factored into economic growth in the model, however.