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Climate macro-modeling tools to address emerging policy questions in Ministries of Finance: why new tools are now needed for the urgent task of implementation

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Institution
Coalition for Capacity on Climate Action (C3A)
Author(s)
Jean-Francois Mercure, Asjad Naqvi, and Etienne Espagne
Published
Topic Area
Considerations for modelling
Citation

Coalition for Capacity on Climate Action (2025) Climate macro-modeling tools to address emerging policy questions in Ministries of Finance: why new tools are now needed for the urgent task of implementation, Contribution to ‘Compendium of Practice from a Global Community of Ministries of Finance and Leading Organizations’, Coalition of Finance Ministers for Climate Action

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Via the development of Nationally Determined Contributions (NDCs), the IPCC evidence review process, and, in particular, the implementation of national climate strategies, climate change considerations are being mainstreamed across government departments (including Ministries of Finance), giving rise to new questions that require new types of analytical tools and frameworks.

Conventional climate-economy modeling approaches do not necessarily serve this purpose well, necessitating new approaches that take into account greater complexity, including the physical realm and dynamic feedback effects.

Key Messages

  • Policy issues with which MoFs are confronted are moving away from sustained growth narratives and toward structural transformation.
  • The implementation of climate action plans requires detailed policy frameworks that can consider multiple objectives, including decarbonization and sustainable economic development, and multiple constraints, including the global economic and financial climate.
  • Conventional climate economics does not provide the requisite answers at this point, and thus new approaches are needed.
  • Emerging approaches include system mapping and dynamic system modeling extended to biophysical systems, measuring cascading impacts via network analysis, and integrating financial and macroeconomic dynamics, allowing for different kinds of disequilibria.
Keywords
financial systemmodelsphysical risksystem dynamicstransition