It is now widely recognized that developing countries—and in particular low-income countries in tropical and sub-tropical regions—will be disproportionately affected by the adverse impacts of climate change.
This study modifies and extends a dynamic single country Computable General Equilibrium (CGE) model to include stochastic elements that are characteristic of climate change and a representation of the sectors that are most likely to be affected in order to evaluate potential adaptation policies. The focus of the modeling is on stochastic elements in general and extreme events in particular. Surprisingly, this focus is relatively new in the economics of climate change. It follows on the work of Hope (2006), who developed the PAGE model. By placing risk and uncertainty at center stage, the PAGE model illustrates that the potential economic damages from climate change, and hence the potential gains from mitigation and effective adaptation, are much larger than had previously been estimated.
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