An overview of options and case studies of deployment
This report provides a systematic overview of analytical tools available to Ministries of Finance to help address the climate policy questions they face and integrate climate into their economic analysis. It serves as a reference for Ministries of Finance and their partners that want to explore how climate-related economic policy can be analyzed and how diverse tools can be used to support climate-informed decision-making.
The report covers 23 tools in four categories, clarifies their use cases, strengths, and limitations, and provides case studies of their deployment. It also maps tools to policy questions to help Ministries of Finance identify those most relevant to their needs and highlights cross-cutting analytical considerations.
Through this overview, the following key messages emerge:
- Different strategies can be used to integrate climate into analytical tools. Ministries of Finance can integrate climate-related factors into their existing economic models and analytical approaches or use tools specifically designed to analyze climate impacts and policies.
- No single tool can answer all relevant questions. Different policy questions require different tools that can capture different variables and perspectives. Multiple tools and sensitivity analyses can provide complementary insights and help assess the robustness of results.
- Tools can be linked or used in conjunction for more comprehensive analysis. The boundaries between tools are not rigid, and they can be combined to leverage their respective strengths, enabling analysis that is both more encompassing and more detailed.
- Continuous learning and development are crucial. Mainstreaming climate in the analysis and decision-making of Ministries of Finance is an evolving process, and peer learning and collaborating with analytical ecosystems are important parts of this.
CITED CONTRIBUTIONS
Canada – Department of Finance
Finance Canada’s approach to climate–economy modeling
Ireland - Department of Finance/Department of Public Expenditure, NDP Delivery and Reform (DPENDR)/Economic and Social Research Institute (ESRI)
Macroeconomic analytical tools: the Ireland Environment, Energy and Economy (I3E) model
European Commission
Overview of the European Commission’s energy and climate policy-related modeling suite
European Commission
Assessing the distributional consequences of the transition in the EU
Finland - Prime Minister's Office
Improving the inclusion of nature and ecosystem service impacts in assessments of the economic impacts of climate risk by Ministries of Finance and economic decision-makers: the experience of Finland
Italy - Ministry of Economy and Finance
The Italian Ministry of Economy and Finance climate-related modeling tools: how to build a flexible suite of models serving different purposes
Morocco – Ministry of Economy and Finance
Computable general equilibrium model for the introduction of a carbon tax for the Moroccan economy
Sweden – National Institute of Economic Research (NIER)
Sweden’s EMEC model, designed to study the long-term economic effects of energy and climate policies
Switzerland - Federal Department of Finance
Introduction of a replacement levy on electric vehicles
Switzerland - Federal Department of Finance
Modeling the fiscal impacts of the net zero target within fiscal sustainability analysis
Asian Development Bank (ADB)
Navigating the trade-offs between investments for growth and climate action: the role of social discount rates
Cambridge Econometrics
Macroeconomic modeling of climate change: the E3ME model
Coalition for Capacity on Climate Action (C3A)
FSMAT: incorporating climate finance into a stock-flow-consistent disequilibrium framework
Council on Economic Policies
It takes two to tango: the role of Ministries of Finance in pricing and non-pricing policies for a low-carbon economy
Danish Research Institute for Economic Analysis and Modelling (DREAM)
The GreenREFORM model
Environment for Development Initiative
Facilitating socially responsible carbon pricing policies: the global Carbon Pricing Incidence Calculator (CPIC)
Environment for Development Initiative
Pricing carbon in the tropics: the CP+ model
ETH Zürich
Latest developments in upgrading DICE-2023: findings and implications for Ministries of Finance
French Economic Observatory (OFCE) - Sciences Po
The ThreeME model
Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science/University of Warwick
Climate tipping points
Green Macroeconomic Modeling Initiative (GMMI)
A community platform to accelerate innovation and progress in assessing green economic transitions
Harvard Growth Lab
The Atlas of Economic Complexity: supporting strategic economic planning and green industrial policy in Ministries of Finance
International Monetary Fund (IMF) Fiscal Affairs Department
Fiscal risks of climate change: Quantitative Climate Change Risk Assessment Fiscal Tool (Q-CRAFT)
International Monetary Fund (IMF) Fiscal Affairs Department
The critical role of Ministries of Finance for investment in adaptation and the analytical principles and tools available
International Monetary Fund (IMF) Research Department
DIGNAD: Debt-Investment-Growth and Natural Disaster model
International Monetary Fund (IMF) Research Department
GMMET: Global Macroeconomic Model for the Energy Transition
International Monetary Fund (IMF) Research Department
IMF-ENV: integrating climate, energy, and trade policies in a general equilibrium framework
Inter-American Development Bank (IDB)/French Development Agency (AFD)/RAND Corporation
SiSePuede: new approaches to assessing economic impacts of net zero pathways
Inter-American Development Bank (IDB)/French Development Agency (AFD)/University of Costa Rica
Managing the fiscal impacts of electric vehicles, public transportation, and cycling
Inter-American Development Bank (IDB)/French Development Agency (AFD)/University of Costa Rica
OSeMOSYS: Open Source Modeling System
Munich Climate Insurance Initiative (MCII)
Showcasing CLIMADA
Network for Greening the Financial System (NGFS)
The NGFS’s approach to the macroeconomic assessment of physical risks
Organisation for Economic Co-operation and Development (OECD)
The new macro-structural climate adaptation and mitigation framework by the Economics Department of the OECD
Paul Watkiss Associates
The analysis of climate impacts, adaptation costs, and adaptation benefits in the UK
S-Curve Economics
Risk–opportunity analysis: policy appraisal in contexts of structural change, uncertainty, and diverse interests
S-Curve Economics/University of Exeter/University of Manchester
Policy packages for cost-effective transitions: learning from the past, simulating the future with the Future Technology Transformations models, and case studies from the Economics of Energy Innovation and System Transition project
S-Curve Economics/University of Manchester/University of Exeter
Low-carbon innovation and industrial strategy: analytical tools and frameworks for Ministries of Finance
SOAS University of London
Ecological stock-flow consistent modeling: an emerging tool for Ministries of Finance
United Nations Environment Programme (UNEP)
IGEM’s integrated approach to climate-smart economic decision-making
University College London
Analytical and policy approaches to the climate and economy
University of East Anglia
Methodological recommendations for Ministries of Finance on climate change risk assessment and the enhancement of damage functions
University of Oxford
The value of using systems mapping to help Ministries of Finance understand the impacts of transformative climate policy
University of Wisconsin–Madison
How government actions have accelerated clean energy innovation: lessons for economic analysis and modeling by Ministries of Finance
World Bank
A new modeling approach combining bottom-up sectoral analyses with top-down macroeconomic models to understand the economic impacts of resilient and low-emissions development
World Bank
Strategic climate risk modeling for economic resilience: a guide for Ministries of Finance
World Bank
World Bank Group climate aware macroeconomic models available for use by Ministries of Finance
World Bank
MFMod-CC: country-specific macrostructural models
World Bank
MANAGE-WB: a recursive-dynamic CGE model
World Bank
ENVISAGE: a global CGE model covering 160 regions
World Bank
MINDSET: an easy-to-use sectoral model covering 164 countries
World Bank – Finance, Competitiveness & Innovation Global Practice (FCI GP)
Stronger analytics for better financial resilience against climate shocks and disasters
World Bank/International Monetary Fund (IMF) Fiscal Affairs Department
The Climate Policy Assessment Tool (CPAT)
World Resources Institute (WRI)