Innovating Climate-Economy Modelling: Dealing with Uncertainty, Risk and Complexity

This policy brief presents five recent modelling advances that strengthen the evidence base for climate and biodiversity action and economic decision-making amidst uncertainty based on DECIPHER research:
1.Emulation for Uncertainty Quantification – enabling thousands of simulations to identify which policies are robust across many futures.
2.Rational Expectations in Computable General Equilibrium (CGE) Models – showing how forward-looking investment behavior can lower transition costs and smooth shocks.
3.Cost of Financing in Technology Diffusion – reflecting how interest rates and capital costs affect the uptake of clean technologies.
4.Flood and Coastal Damage Assessment – linking detailed coastal risk assessment with macroeconomic models to reveal the economic value of adaptation.
5.Multiple Resilience Dividend – capturing avoided losses, development co-benefits and inequality reductions from risk-management investments, strengthening the case for sustained adaptation and mitigation.