Advanced Review

On the economic foundations of

green growth discourses: the case
of climate change mitigation and
macroeconomic dynamics in
economic modeling
S. Scrieciu,1 A. Rezai1 and R. Mechler1,2

Greening economic growth discourses are increasingly replacing the catchword

of sustainable development within national and international policy circles. The
core of the argument is that the growth of modern economies may be sustained
or even augmented, while policy intervention simultaneously ensures sustained
environmental stewardship and improved social outcomes. But how well are
these claims scientifically grounded or supported by economic theory, evidence,
and applied modeling? We address this question with reference to the economic
modeling of climate mitigation policies. We argue that orthodox economic equi-
librium and optimization thinking offers, in effect, little support to and insuf-
ficiently meaningful interpretations of green growth claims. There are several
exciting strands of new economic thinking that are emerging, offering a more
robust and empirically validated understanding of the potential for green growth
paths. Nonoptimizing simulation models are arguably in a better position to cap-
ture socioeconomic system dynamics and the role of macroeconomic policies for
sustainability governance. An important caveat, nevertheless, is that when judged
against the evidence, greening growth remains to some extent an oxymoron as
to date there has been little evidence of substantial decoupling of GDP from
carbon-intensive energy use on a wide scale. Moreover, although the rhetoric on
greening the economy actively supports the need for policy intervention, the
macroeconomic reasoning behind this, remains ambiguous. We finally suggest
that, although focusing on the dichotomy between growth and the environment
is clearly important, the quality of growth and beyond growth dimensions are at
least as important for delivering improved macroeconomic governance for sus-
tainability. 
C 2012 John Wiley & Sons, Ltd.

How to cite this article:

WIREs Energy Environ 2013, 2: 251268 doi: 10.1002/wene.57

INTRODUCTION ers throughout the world. This is entirely understand-

G DP growth has been an unquestioned impera-
tive for most macroeconomists and policymak-
*Correspondence to: sscrieciu@wu.ac.at
1 Institute for the Environment and Regional Development, Vienna
University of Economics and Business, Vienna, Austria
2 International Institute of Applied System Analysis, Laxenburg,
Austria
DOI: 10.1002/wene.57
able for policies and discourses in developing and
emerging economies, where rising output is consid-
ered a necessary condition for alleviating poverty and
advancing living standards. However, even in OECD
(Organisation for Economic Co-operation and De-
velopment) countries, where basic standards of liv-
ing have been met, macroeconomists continue to see
growth as the socially stabilizing necessity. Pathways
to growth for the last 250 years have been via in-
creasing energy use to increase labor productivity, in

Volume 2, May/June 2013 

C 2012 John Wiley & Sons, Ltd. 251
Advanced Review
particular from finite and polluting fossil fuel re-
sources. For the past decades, many scientists have
been pointing toward the unsustainability of this
process given important ecological boundaries and
warned that we may be close to or even beyond bio-
physical systemic thresholds (see Ref 1). Paradoxi-
cally, although they consider unrestrained economic
growth the cause of unsustainable development, the
standard response has been to consider it the cure.
Accordingly, green growth pathways are being en-
visaged that involve the continuation of economic de-
velopment while significantly reducing the extraction
of natural resources and limiting humankinds eco-
logical footprint.
As references to green growth conceptualiza-
tions are multiplying fast in both academic and pol-
icy or practice circles, the term is often used as an
ambiguous catch-all phrase. We base our discussion
on two definitions. The OECD defines green growth
as growth that allows natural assets to continue to
provide the resources and environmental services on
which well-being relies.2 We will refer to this defi-
nition as the green growth hypothesis. Closely re-
lated to the green growth paradigm is the concept of
green economy. The United Nations Environment
Programme (UNEP) defines this as an economy that
results in improved human well-being and reduced
inequalities over the long term, while not exposing
future generations to significant environmental risks
and ecological scarcities.3,a As such, the green econ-
omy and green growth concepts may usefully frame
policy discussions, given that they provide alterna-
tive operational interpretations of the concept of sus-
tainable development. However, they fail to explic-
itly acknowledge the role of macroeconomic policies
in sustainability governance, and the critical need to
rethink macroeconomics to restructure economic sys-
tems more in line with better environmental steward-
ship and social cohesion.4
Green growth and the balancing of economic
aspirations with ecological imperatives5 have been
relatively recent concerns. During the early phases of
industrialization, and even leading up to the 1960s,
environmental pressures exerted by economic activ-
ities were considered local and rather marginal is-
sues (such as air and water pollution). Later on, when
faced with larger-scale ecological problems (such as
Waldsterben, oil spills, the depletion of the ozone
layer), concern, however, increased dramatically. Yet,
due to the obvious and visible success of predom-
inantly implemented end-of-pipe technologies, con-
cern somewhat diminished and was replaced by the
optimism on mankinds ability to clean up as soci-
ety develops and the economy grows (i.e., the Envi-
252 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
ronmental Kuznets CurveEKC hypothesis). Conse-
quently, economic growth has become to be widely
regarded as the solution rather than the problem.
Although the EKC hypothesis and the ability to
relatively decouple economic growth from associated
environmental impacts have been challenged for
several environmental problems (see, e.g., Ref 6),
the real challenge may be more related to scale and
absolute decoupling. As recently suggested in the
literature on human-environment interactions (see
Ref 1), we may be close to crossing key earth system
boundaries (denoted as the safe operating space),
such as levels of ocean acidification, availability of
global freshwater, and chemical pollution. Three
thresholds (climate change concentrations, rate
of biodiversity loss, nitrogen removal from the
atmosphere for human uses) may actually have been
overstepped already. For one of these thresholds, the
climate change problem tackled in this paper, the
challenge may be particularly pronounced.
As estimates by the Intergovernmental Panel
on Climate Change show, per-capita greenhouse gas
(GHG) emissions in developed nations must be re-
duced by at least 8095% by 2050, if global warm-
ing is to stay within 2 C above preindustrial values.7
On the basis of the information provided by climate
scientists, this target is considered by policymakers to
be a relatively safe threshold below which climate-
related impacts may be within most societies cop-
ing ranges. The challenge of staying within this limit
starkly conflicts with existing patterns of economic
growth, which have been heavily dependent on the
increased use of fossil-fuel energy and other GHG-
intensive resources throughout the world. Relative de-
coupling of GDP and energy use has been achieved to
some extent, yet absolute decoupling has not.8 Mod-
ern economies remain structurally dependent upon
continued fossil-fuel-based economic growth, and or-
thodox macroeconomics assumes that economies can
grow indefinitely under a laissez-faire scenario.
In contrast, the core of greening the economy
arguments is that the growth of modern economies
may be sustained or even augmented, whereas pol-
icy intervention ensures that greater environmental,
climate and social protection or well-being is also
achieved. Broad-based acceptance and implementa-
tion of green growth are, nonetheless, far-off propo-
sitions. But how well are these claims scientifically
grounded or supported by economic theory, eco-
nomic modeling, and various strands of applied eco-
nomics and empirical analysis, particularly at the
macro level? This paper aims to address this in rela-
tion to the climate change problem and its mitigation
responses. The following section tackles some main
Volume 2, May/June 2013
 WIREs Energy and Environment
aspects of economic thinking behind the green growth
hypothesis. Economic Modeling Approaches to Cli-
mate Change Mitigation and Economic growth inves-
tigates the economic methodological approaches and
economic modeling types that are being applied to cli-
mate mitigation policy analysis. Beyond Growth Con-
siderations discusses beyond growth impacts of mit-
igation action and their relevance for understanding
green growth prospects. Concluding Remarks con-
cludes and points toward the way forward for ren-
dering economic analysis and green growth discourses
more consistent.
GREEN GROWTH AND ECONOMIC
THINKING: FOUNDATIONS AND
CONFLICTS
For the clarity of our discussion, it is important to
mention from the start that the term of neoclassical
economics tends to carry some level of ambiguity.
Some argue that although it can be used in a histor-
ical sense, from a modern economic thinking point
of view, it is redundant and can be declared dead.9
However, although modern economics has advanced
considerably and departs substantially from its ear-
lier neoclassical form, most of its body of literature
continues to draw on core concepts and assumptions
that have not changed since the advent of neoclassical
economics and its marginalist revolution at the end of
the nineteenth century. These particularly consist of
equilibrium and market clearing assumptions, and the
optimization (profit, welfare, or utility maximization)
behavior of perfectly rational representative agents.
Having said this, to avoid the controversies and de-
bates surrounding the use of the neoclassical eco-
nomics term, we shall refer instead to conventional
or orthodox economics as the body of economics
literature that dominates the mainstream.
Orthodox economists have rejected environ-
mental limits to continuous growth and ever-growing
consumption, arguing, in principle, that self-regulated
markets are able to deliver the innovative technolo-
gies necessary to avoid environmental catastrophes.
On the other hand, ecologists and other nonortho-
dox economists have been stressing the importance
of environmental constraints and physical limits to
economic growth. They argue that economic growth
should be pursued only within the carrying capacity
and the limits that our natural environment allows
us to do so. The conflict between these two perspec-
tives has remained unresolved, as no overwhelming
challenging constraints on growth at the macroeco-
nomic or global levels have arisen, until the emergence
Volume 2, May/June 2013 
C 2012 John Wiley & Sons, Ltd.
Economic foundations of green growth discourses
of the man-made climate change problem that puts
to test these opposing views.10 Addressing anthro-
pogenic global warming would chiefly require large-
scale, radical, and unprecedented changes in energy
and land-use systems, and the way we produce, dis-
tribute and consume our products and services.
Yet, the climate change problem and its pol-
icy responses, too, have predominately been analyzed
using conventional economics growth models. These
can be characterized by the assumption that prices
clear to ensure the full employment of resources. In
doing so, markets also ensure the achievement of the
first best solution. The weaker manifestation of such
growth models are of Solow type in which consump-
tion and saving decisions are not taken endogenously
to maximize utility, but are exogenously determined
(e.g., the FUND model used in Ref 11). Such strong as-
sumptions are to some extent relaxed, however, in the
growth models of the Ramsey type, whereby agents
maximize their utility through their endogenous deci-
sions but are assumed to have perfect foresight. The
DICE and RICE models of Refs 12 and 13 are the
most prominent and widely used models of this type.
They have had some policy influence particularly on
Northern American climate policy in terms of sug-
gesting a carbon ramp characterized by very moder-
ate and slowly increasing mitigation action over the
coming decades. The in-built assumptions of ortho-
dox modeling approaches to climate mitigation are
typically those of perfect rationality, perfect foresight
and equilibrium, whereby market price signals are
claimed to ensure optimization and the realization of
the best of all worlds. Obstacles such as biophysi-
cal limits or scarce resources are always foreseen and
wisely circumnavigated in this utopian economic or-
der. If the world were such, there would clearly be no
need and role for policy or public intervention.
In contrast to this position, the suggestion that
the economy needs to stabilize to respect the lim-
itations implied by the finiteness of resources and
other environmental constraints is an important topic
within climate/environmental science, as well as other
alternative schools of economic thought, such as eco-
logical economics. Ecological economists reject the
smoothness of transitions to a steady state implied
by orthodox growth models. The strong sustain-
ability paradigm generally follows from the laws of
thermodynamics.14, 15 Given the fact that in a closed
system (the earth) entropy (heat or disorder) is bound
to increase and free energy (exergy) to decrease,
the feedback from large entropy on human activ-
ity should finally lead to rising costs of resource use
and limits on economic growth.16, 17 This creates ten-
sions with the empirical trend of rising energy use per
253
Advanced Review
capita and output growth. There has been substantial
and influential work studying the potentially conflict-
ing interactions of growth and the environment over
the last 40 years. Groundbreaking analyses such as
the World3 model simulations of Limits to Growth
in 197218 and theoretical deliberations by Herman
Daly19 (better, not bigger), laid foundations for a
large body of research, which has since raised ques-
tions whether perpetual growth is possible, desirable
or outright harmful. Yet, in terms of macroeconomic
analysis, there has been relatively little concrete the-
orizing on the growthenvironment nexus, the focus
being on empirical studies and measurement of in-
creasing resource use (notable exceptions are Refs 19
and 20; see also Ref 21).
In essence, the green growth paradigm aims at
reaching a compromise in that it suggests perpetual
economic growth and environmental sustainability
can be, in fact, reconciled (see Ref 5). The feasibil-
ity of moving toward this altered growth framework
remains, however, under question. On one hand, it
recognizes the importance of ecological limits to eco-
nomic dynamics. On the other hand, it argues that,
given such limits, economic growth can be sustained
as long as business-as-usual practices are abandoned
in favor of economies that place more emphasis on en-
vironmental and social investments. In other words,
under the green growth and green economy paradigm,
it appears that the critical importance of ecosystem
properties, thresholds, and functions is respected, and
a limited (or weak) substitutability between man-
made capital and ecological endowments is advo-
cated. This renders green growth discourses more
akin to ecological economics and other nonorthodox
economic thinking, such as post-Keynesianism with
its focus on institutions, bounded rationality, subop-
timal resource use and the role of policy in driving
economies toward socially preferred outcomes. Hav-
ing said this, our interpretation is however that the
green growth approach tends to advocate similar lev-
els of growth rates as historically achieved under the
fossil-fuel economy, by supporting what-may-prove-
to-be an overly optimistic viewpoint on the environ-
mental/climate decoupling of growth. In the case of
climate change, although, theoretically, GHG emis-
sion trends could be reversed without significantly in-
terrupting past growth rate performances. However,
such delinking would represent a drastic change from
the economic patterns of the last 150 years.10
The paper further explores the interactions be-
tween the economy and the environment with relation
to climate change mitigation and applied climate
energyeconomy modeling. A caveat here is that it is
not possible to empirically test the green growth hy-
254 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
pothesis with relation to climate change mitigation.
Worldwide, we are at an early stage of climate ac-
tion. No sufficient policies have been implemented
to make a significant dent in the global growth of
cumulative GHG emissions. Subsequently, no suffi-
cient data are available for a meaningful statistical
analysis of the growth consequences of stringent mit-
igation action that could prove or disprove the green
growth hypothesis on the climate front. All energy
environmenteconomy modeling results applied to
the climate change problem represent projections and
simulations.
ECONOMIC MODELING APPROACHES
TO CLIMATE CHANGE MITIGATION
AND ECONOMIC GROWTH
This section aims to disentangle from the complexi-
ties of economic modeling those elements that might
or might not lend support to the hypothesis that cli-
mate control action may be compatible with economic
growth prospects (along the lines of the green growth
philosophy). Such models are presented, for ease of
reference, under the label of climateeconomy mod-
els. Models with a strong energy focus but with a sim-
ple representation of economies (e.g., energy-system
models), where macroeconomic dynamics are typi-
cally exogenous will only be mentioned in passing.
Various taxonomies have been put forward and
applied to the range of climateeconomy models pop-
ulating the literature. Two main criteria are consid-
ered here. The first criterion would take into ac-
count the economic theoretical underpinnings (i.e.,
their scientific paradigm) and model solution ap-
proach to representing economic processes and out-
comes. Accordingly, climateeconomy models could
be classified into optimization models and simula-
tion or nonoptimization models. The second crite-
rion considers the level of technological analysis and
the manner in which energy technologies are being
represented within the modeling framework. From
this perspective, models could be classified as belong-
ing to the bottom-up group (high technological de-
tail and explicit energy technological representation),
top-down group (low technological detail and im-
plicit energy technological representation), and the
hybrid group (moderate technological detail and ex-
plicit technological representation). A stylized illus-
tration of the model types circulating in the climate
economics literature is provided in Figure 1.
Optimization versus Simulation
Economic optimization models largely rest on ortho-
dox economic theories of growth and equilibrium.
Volume 2, May/June 2013
 WIREs Energy and Environment
F I G U R E 1 A stylized classification of climateeconomy models for a cost-effectiveness analysis of climate mitigation. CGE, computable
general equilibrium; PE, partial equilibrium; DSGE, dynamic stochastic general equilibrium; SOG, stochastic optimal growth.
They employ mathematical optimization techniques
(e.g., linear programming) to economic analysis, and
have taken, predominantly, the form of computable
general equilibrium (CGE) models, (exogenous or en-
dogenous) optimal growth (OG) models, or a com-
bination of these (see Figure 1). Some economic op-
timization models are part of the widely cited and
used integrated assessment models (IAMs), although
their definition carries some ambiguity. Most of these
combine a climate change module with a conventional
CGE or optimal growth macroeconomic model, and
are often used for the purpose of costbenefit anal-
ysis of optimal emission pathways, although they
can be run as well in cost-effectiveness mode, when
climate stabilization targets are given (e.g., the pol-
icy optimization FUND model in Refs 2224). Taken
at the macroeconomic level, climateeconomy CGE
models generally assume a first-best world, where
economies are at full employment and output poten-
tial, and achieve equilibrium via price adjustments
and market clearing. This is implicitly translated into
an insignificant role for fiscal, monetary and other
macroeconomic policies to push economies toward
more sustainable outcomes. Although dynamic com-
ponents are incorporated, their treatment is often
poor and highly stylized.25, 26 Moreover, the dynam-
ics of economic behavior are interlinked with the is-
sue of technological change, and in the case of re-
cursive CGE models; for instance, it has been noted
that these face particular difficulties in incorporat-
Volume 2, May/June 2013 
C 2012 John Wiley & Sons, Ltd.
Economic foundations of green growth discourses
ing endogenous technological change and increasing
returns.27 Optimal growth models are mostly models
that derive their intertemporal conditions by satis-
fying the optimal growth path chosen by a central
planner.28 In their classical form, they are known
as Ramsey infinite horizon optimization model,28,b
although in modern conventional macroeconomics
these have progressed to include several endogenous
growth developments (focusing largely on the sup-
ply side). They are regarded as a special case of gen-
eral equilibrium models where time is included and
intertemporal optimisationwhereby a social plan-
ner maximizes global welfare over a given periodis
pursued.29,c
Conventional economic optimization CGE or
growth models abound in the climate mitigation
modeling literature and constitute by far the ma-
jority of models developed for the study of climate
policies. Examples are many and include the CGE
models IMACLIM-R,30 WorldScan,31 AIM,32 and
ENV-LINKAGES33 ; the climateeconomy optimal
growth modelsFEEM-RICE, ENTICE-BR, DEME-
TER, and MIND models considered in the IMCP
model comparison study,34, 35 or the many multisector
general equilibrium optimization models employed in
the EMF21 study,36 such as GEMINI-E3, GTEM, and
WIAGEM. The dominance of this particular type of
models is a reflection of a wider fundamental prob-
lem of the economics discipline in that it allows lit-
tle space for pluralism and for alternative schools of
255
Advanced Review
economic thought to coexist. This is demonstrated,
for instance, by undertaking a quick survey of rela-
tively recent and widely cited model comparison exer-
cises in the area of economics and climate change mit-
igation. Out of 30 climateeconomy models spanning
seven model comparison studies,d only one model
coming from the nonoptimization, nonequilibrium
simulation approach was included in the analysis
the hybrid macroeconometric E3MG model draw-
ing on demand-driven growth and post-Keynesian
economics.42, 43
The class of conventional optimization mod-
els are mostly supply-driven, as their structure pri-
marily revolves around various production func-
tions. Exogenous or endogenous growth processes at
the macroeconomic level are assumed to be supply
driven (output as a function of technological progress,
labor, and capital). CGE and other optimization
models often represent government fiscal policy as
lump-sum taxes (fixed amounts) so that theoreti-
cal economic efficiency losses from government in-
tervention are minimized. Furthermore, optimization
models for climate policy analysis are largely deter-
ministic. Although, strictly speaking, any economic
theory should be empirically validated, the assump-
tions of economic optimization models are often ab-
stract and rarely grounded in observed behavior.e
More recent developments, however, accommodate
for some stochastic elements. For instance, dynamic
stochastic general equilibrium (DSGE) models or
stochastic optimal growth (SOG) models investigate
aggregate economic phenomena (such as economic
growth), whereas allowing for random shocks (e.g.,
technological change, government policies) to in-
fluence, in addition to initial conditions, economic
outcomes.f DSGE models essentially draw either on
real business cycle economic growth theory in the
neoclassical tradition or on neo-Keynesianism (or
new Keynesianism) macroeconomics. The latter al-
lows for suboptimal macroeconomic behavior, such
as the existence of unemployment, albeit still under
market equilibrium conditions.28,g Nonetheless, few
have been applied to climate policy analysis.h
The idea of green growth is often not compat-
ible with the forecasts made by such orthodox eco-
nomic optimization models. According to the latter,
economic growth is hindered by climate mitigation
measures, and the possibility of policy induced green
growth occurring at rates higher than those linked to
business-as-usual growth is ruled out by default. In
the case of simulation models, the initial theoretical
setup and assumptions are quite the opposite. Their
starting point is to try and more realistically repre-
sent the workings of economic and energy systems
256 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
by describing these as being suboptimal nonequilib-
rium processes, where there is limited foresight and
resources are not always fully employed or optimally
utilized in the baseline.39, 40
Simulation models do not optimize a particular
objective function as in the case of their optimization
counterpart, but describe instead a number of inter-
linked energyemissionseconomic relationships that
allow for exploring the propagation of perturbations
to the system.50 Simulation models are also sometimes
referred to as policy evaluation models, and contrary
to optimization models they are not prescriptive. They
model economic interactions based on observations
and have more freedom to model phenomena that
are often inconsistent with some of the assumptions
of optimization models.51 In optimization models, the
economy is assumed to be in equilibrium and follow
an optimal path, given the (tax) constraints it faces.
Once there is a perturbation in the form of introduc-
ing further constraints in the form of climate policy
measures (e.g., carbon taxes, emissions permit prices),
the economy deviates from its optimal (baseline) path.
In other words, these models typically project a by-
default cost to the economy from governments inter-
vening for atmospheric stabilization. Optimization
models could at bestif they were based on precise
data and knowledgegive an impression of what is
possible to achieve maximally.52
Most optimization economic models are mis-
guided in their negligence of economic externalities
and suboptimal equilibria.53 However, once these are
taken into account, green growth could be imple-
mented and achievable even in optimization mod-
els, given that distortions in the baseline prove to
be overall greater than in the counterfactual or al-
ternative (climate) policy intervention scenario. For
instance, the traditional CGE model, GEM-E3 (used
by the European Commission to assess climate change
and energy policies) has been enhanced by introduc-
ing learning-by-doing, permitting the natural rate of
unemployment to vary, and allowing for expecta-
tions to influence economic dynamics. This allows
for the existence of multiple equilibria, and the mod-
eling of transition (triggered by a well-designed cli-
mate policy) from an inferior equilibrium with high
unemployment and low growth to a superior equi-
librium with smaller emissions, more jobs and higher
growth. However, CGE models that allow for exter-
nalities and inferior equilibria in their depiction of
economies are extremely sparse in the literature.
In second-best world setups of mostly simula-
tion models, climate policies could lead in the longer
run to outcomes with lower costs or even negative
costs, for example, higher economic output relative
Volume 2, May/June 2013
 WIREs Energy and Environment
to a baseline. An interesting case in this respect is
the macroeconometric nonequilibrium E3MG model
that projects GDP gains from emissions stabilization,
with the gains even increasing with the stringency of
the target, for instance, from around 1.2% of global
GDP for a 550 ppm CO2 e stabilization target to
approximately 2.1% for a 400 ppm CO2 e target.42
Such mitigation gains are explained in the E3MG
model setup partly through a Keynesian treatment of
demand-side long-term growth (whereby climate pol-
icy induces and accelerates technological change to-
ward low-carbon sources), and partly due to allowing
for carbon-permit revenue recycling that further stim-
ulates low-carbon innovation and lowers other taxes
in a world with underemployed and unemployed re-
sources. In addition, the portrayal of pricing mecha-
nisms in simulation models rests on different hypothe-
ses compared to the conventional general equilibrium
economic theories. For instance, in the GINFORS
(Global INterindustry FORecasting System) macroe-
conometric simulation E3 model the main difference
relative to CGE models is the representation of prices,
which are determined due to the mark-up hypothesis
by unit costs and not specified as long run compet-
itive [equilibrium] prices (see Ref 55, p. 318). Put
differently, climateeconomy simulation models are
more likely to provide a consistent scientific basis for
green growth discourses, particularly because climate
action in a modeling simulation setup does not nec-
essarily result in slower or lowered economic growth
rates. Their theoretical economics and methodolog-
ical basis can take inspiration from both alternative
economic theories (e.g., post-Keynesianism, ecologi-
cal economics, behavioral economics, and evolution-
ary economics) and parts of mainstream economics
and techniques, such as (short-term) Keynesianism,
and respectively, econometrics.
Simulation or nonoptimization models for
climate policy analysis mostly comprise (macro)
econometric models, agent-based (AB) models, part
of input/output (IO) models and some energy sys-
tem models (see Figure 1).i Macroeconometric mod-
els rest on the principle that without understanding
the past it is almost impossible to discuss the future.
In these models, economic behavioral relationships
are empirically estimated at the macro and sectoral
levels, with parameters, trends, and the explanatory
power of various variables being established using
fairly established econometric/statistical techniques
from large historical databases. There are implicit
assumptions here of path dependency, the assertion
that history matters, and the critical role that macroe-
conomic policy should play in changing the status
quo, which are more akin to institutional economics,
Volume 2, May/June 2013 
C 2012 John Wiley & Sons, Ltd.
Economic foundations of green growth discourses
pPost-Keynesianism and other strands of heterodox
schools of economic thought (e.g., in a time series ap-
proach little economic theory is imposed a priori on
the model.60 There are very few macroeconometric
models for climate policy and energyenvironment
economy analysis available in the literature. Their the-
oretical structures draw largely on Keynesian or post-
Keynesian macroeconomic theory of demand-driven
growth. Widely cited are the Cambridge suite of mod-
els, E3MGglobal analysis,42, 43 E3MEEuropean
analysis,61, 62 and the MDM-E3 multisectoral dy-
namic model at the UK level.63, 64 These are nonequi-
librium dynamic models, highly disaggregated across
sectors, where the standard economic assumption
of a representative optimizing agent does not hold,
and where nonlinear interaction effects are consid-
ered. There is also the COMPASS macroeconomet-
ric simulation model65 and its improved version, the
GINFORS model employed for climate policy anal-
ysis (see Refs 66 and 67. However, it is stated that
the theoretical structure of GINFORS is more driven
by relative prices and its nonneoclassical interpreta-
tion of pricing mechanisms, rather than necessarily
demand driven in the Keynesian sense.55 Two further
macroeconometric models (although limited in re-
gional coverage) are the PANTHA REI multisectoral
econometric simulation model for studying the effects
of environmental fiscal reforms in Germany,44, 68 and
the models HERMES and NEMESIS for Belgium and
Europe, respectively.69 In the latter two macroecono-
metric models, Keynesian mechanisms appear to play
a key role in the short run (output determined by de-
mand), whereas in the long run classical effects take
over with growth being determined by structural fac-
tors such as technological change and demography.69
AB models simulate the behavior of social and
economic systems by differentiating between differ-
ent rationally bounded controlling agents and largely
drawing on the cultural theory of risk.70 Their be-
havioral parameters may also be derived empirically,
although there is a lack of consensus on core method-
ological questions and empirical validation among
the AB modeling community.71 The strength of AB
economic models is in providing more realistic mi-
croeconomic theoretical foundations for the driving
forces of economic processes.72 Having said so, they
are not considered as adopting a bottom-up approach
to climate economy modeling in the engineering sense
of incorporating high explicit technological details,
but rather a top-down approach with limited repre-
sentation of energy technologies (see Figure 1). They
are also able to explain how some crucial macroe-
conomic phenomena can be generated by the evolv-
ing networks of interactions among agents in the
257
Advanced Review
economy where the fundamental may endogenously
evolve over time.71 With relation to climate policy
analysis, although a substantial part of AB models
have looked at microeconomic behavior, there are
some that have built up their analysis to the macroeco-
nomic level. Examples include the multiagent climate
economics modeling approach presented in Ref 73,
or the multiagent framework presented in Ref 72. In-
stead of deriving an optimal solution, these models
simulate the behavior of different categories of agents
within a system (e.g., risk-conscious, risk-averse envi-
ronmentalist, free-market advocate, scientifically in-
formed agents) according to their climate change
perceptions.52
Some I/O models may also adopt a simula-
tion approach for the evaluation of industry-level
and macroeconomic impacts of climate mitigation.
Examples include the dedicated IO simulation ap-
proach for studying the interactions between energy
efficiency investments and employment in a couple
of developed countries presented in Ref 75. The au-
thors employ a so-called lifestyle-oriented energy
economyenvironment model which couples a de-
tailed modeled of household behavior with a dedi-
cated IO model, whereby some consumption dynam-
ics are included (as opposed to the classic IO model
with fixed IO coefficients). The microlevel household
module draws on case studies and empirical observa-
tions from household surveys and microdata source
of the role the economic, technical, sociodemographic
and life-style factors on household behavior. Inter-
estingly, the IO approach is argued to be demand
driven (because industry supply is determined only by
demand) and to not necessarily describe an equilib-
rium approach or perfectly competitive markets (be-
cause IO tables allow for the existence of industry
profits).74, 75
In summary, despite the increase in model com-
plexity on the orthodox economics side, the strand of
conventional optimization models continues to indi-
cate toward costs that are overall higher (and increas-
ing with the stringency of the target) than their alter-
native climateeconomy simulation counterparts. The
concept of equilibrium either in its static or dynamic
form and either from a partial or general investigation
perspective influences most perceptions of climate
economy modeling.28 Alternative climateeconomy
simulation models provide some scientific ground-
ing of the green growth hypothesis, as some (e.g.,
the Cambridge suite of macroeconometric demand-
driven models) anticipate benefits from climate
action. This is partly attributed to their theoretical un-
derpinnings and methodological approach to model-
ing energyenvironmenteconomy interactions. Some
258 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
of these essential differences, discussed above, be-
tween orthodox optimization models and alternative
nonoptimizing simulation modeling approaches, ap-
plied to climate mitigation, and in general to (macro)
sustainability issues, are summarized in Table 1. For
example, under the conventional approach, markets
are assumed to be well behaved, self-stabilizing and
self-equilibrating, sidelining the critical role of non-
quantifiable fundamental uncertainty, and the key
characteristic of market instability and volatility in-
herent to modern capitalist economies.4 The typical
optimization group of models portrays a first-best
world, where markets are perfectly competitive and
do not allow for suboptimal markets, whereas the
simulation nonequilibrium branch of models captures
market distortions and accommodates for heteroge-
neous economic agents with bounded rationality and
myopic behavior. Having said this, such differences
in mitigation cost estimates are less due to model type
per se, but rather to the assumptions made by the dif-
ferent modeling communities, on foresight, intertem-
poral investment/consumption behavior or resource
employment.35
Top-Down, Bottom-Up, and Hybrid
Approaches
A further crucial issue distinguishing between various
climateeconomy models available in the literature
and contributing toward understanding the economic
impacts of climate mitigation is the representation
of technologies and their dynamics, particularly in
the energy sector. The top-down versus bottom-up
(with hybrid as an in-between category) classi-
fication has often been deployed in the literature
discussing climate policy modeling (e.g.,76, 77 . This
is because it offers a useful grouping and distinction
between orthodox macroeconomic models with,
typically, a poor or reductionist representation of
technologies, and the engineering tradition with a rich
representation of individual energy technologies.40
However, in current practice, the distinction be-
tween models according to this criterion is far from
clear-cut, with considerable variation across the
categories.40
Energy systems (whether they are based on opti-
mization or simulation techniques) represent the bulk
of so-called bottom-up models for climate policy
and energy/environment planning. They can incorpo-
rate thousands of individual technologies with their
physical and economic parameters explicitly modeled
(e.g., the Markal family of bottom-up energy-system
models in Ref 78. However, they have a simple,
often exogenous, characterization of macroeconomic
Volume 2, May/June 2013
 WIREs Energy and Environment Economic foundations of green growth discourses

T A B L E 1 Some Critical Differences between the Orthodox Optimization Equilibrium Economic Modeling Approach and Alternative
Simulation Economic Models
Key Differences Orthodox Optimization Economic Modeling Alternative Simulation Economic Modeling

Market equilibrium
View of the macro-world
View of the microworld
Empiricism
Uncertainty
Technological change
Economic growth
Macroeconomic policy
Institutions
Green growth potential
Economies are in equilibrium, markets
always clear via long run competitive
pricing
First-best world with optimal utilization and
full employment of resources
Representative economic agents, fully
rational, and often with perfect foresight
Predominantly deterministic with little
empirical validation
Assume well-behaved markets and quantify
uncertainty through the use of certainty
equivalents
Limited endogeneity; belief in markets
self-delivering (environmental)
technologies
By and large, supply driven with economies
structured around production functions
Government intervention is generally seen
as adding distortions to the economy
and is reduced to market-based
instruments (e.g., carbon pricing)
Reduced to ensuring conventional
(neoliberal) macroeconomic stability;
the use of logical time
Typically do not support green growth
hypotheses, as policy interventions for
environmental stewardship and social
cohesion are seen as negatively affecting
growth (e.g., slower growth from
mitigation)
Markets do not necessarily clear, neither in the
short run nor in the long run; economic
systems evolve and are under continuous
perturbations
Second-best world with suboptimal utilization
of resources; allows for under-employment,
unemployment, and socially determined
income distribution
Heterogeneous agents with bounded
rationality and limited foresight, tackling
the limitations to aggregation
Can be empirically validated and grounded in
observed behavior
Allow for market instability/volatility and for
fundamental uncertainty displaying
nonquantifying behavior.
More comprehensive endogeneity;
policy-induced technological change
Also draws attention to demand-driven output
growth and employment (e.g., Keynesian
based)
More room is given to policy intervention, and
the importance of both fiscal and monetary
policies in shaping greener growth
pathways
Institutions are given wider scope and role in
shaping development pathways; the use of
historical time and institutional path
dependency
Can provide support to greening the economy
discourses; for example, climate mitigation
action may benefit the economy and is not
necessarily seen as a costly constraint

dynamics, and are not particularly relevant for an-
alyzing the impact of climate policies on economic
growth or other macroeconomic aggregates.
Top-down models are macroeconomic models
with an indirect or implicit representation of highly
aggregated technologies (often reduced to fuel types
as inputs into production processes). They are typi-
cally dominated by the previously discussed conven-
tional supply-side optimization models, spearheaded
by William Nordhaus and Richard Tol through their
application of the DICE12, 79 and FUND models.22, 23
Other top-down macroeconomic models for climate
policy analysis are sparse and, as discussed, can
be based on Keynesian or post-Keynesian demand-
side economics and macroeconometric simulation
approaches (e.g., the E3MG and GINFORS mod-
els) or can take the form of AB economy mod-
els. The hybrid climateeconomy modeling is a
less well-defined category and, in principle, it in-
cludes some sort of combination between bottom-
up and top-down approaches, reaching a compro-
mise between technological and macroeconomic de-
tail (see Figure 1). Most hybrid models do explic-
itly model energy technologies even though their dis-
aggregation is greatly reduced compared to bottom-
up models. Hybrid models can come from the engi-
neering modeling community attaching a macroeco-
nomic module to their energy-supply models (e.g., the

Volume 2, May/June 2013 

C 2012 John Wiley & Sons, Ltd. 259
Advanced Review
MESSAGE-MACRO model in Ref 80, or from
macroeconomists attaching an energy-technology
module to their top-down macroeconomic models).
Examples include REMIND-R and MERGE linking
a CGE top-down model with a bottom-up energy-
system component in Ref 81 and, respectively, in Ref
82, or E3MG integrating an energy-technology mod-
ule into a top-down macroeconometric nonequilib-
rium simulation modeling framework in Ref 42.
The earlier climate mitigation energy-economy
modeling literature varied significantly in terms of the
influence of technological detail and endogenous tech-
nological change on the estimated costs of emissions
reductions, from large cost estimates in top-down
models to modest costs or even small negative costs
in the bottom-up modeling approach.34 Most of the
top-down climateeconomy models relied and con-
tinue to employ a general equilibrium approach and
aggregate production functions that allow incremen-
tal input substitution as prices change, even if the
resulting input configuration does not correspond to
a real technology (e.g., the EMF-19 model compari-
son study in Ref 37). However, both top-down and
bottom-up models have become increasingly sophis-
ticated allowing in their structure elements from the
opposite approach and giving rise to a range of hybrid
models. These adopt a process-analysis approach
for the energy sector (each technology is individu-
ally and explicitly modeled) and an aggregate pro-
duction approach for the remainder of the economy
(e.g., the MERGE and GRAPE hybrid models em-
ployed in EMF-19). The hybrid modeling approach
is thus considered to have dual advantage of avoid-
ing both the typical optimistic bias often attributed
to the bottom-up engineering approach, and the un-
duly pessimistic bias of orthodox macroeconomics
approach.27 In other words, differences in cost es-
timates attributable to the top-down/bottom-up di-
chotomy are less clear-cut in newer or revised models
for climate mitigation analysis.
Closely connected with the top-down/bottom-
up/hybrid classification is the issue of innovation and
technical progress, which has a significant impact on
projected economic costs of climate mitigation. There
is a distinction in the climate economics literature be-
tween technological change that is endogenous and
that that is induced. Technological change occurs as
a response to intentional investment decisions taken
by economic agents who react to various market
incentives.83 The modeling of endogenous technolog-
ical change largely adopts two approaches when ap-
plied to the energy sector and climate mitigation: top-
down knowledge capital effectsaccumulated R&D
and learning-by-doing and, respectively, the bottom-
260 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
up learning-curves approachdirect knowledge in-
vestment and learning-by-doing.27, 34 Furthermore, in
the context of climate change, technological invest-
ment decisions are spurred not only by market in-
centives, but also by governments and policy, civil
society, and other relevant stakeholders. This is be-
cause climate mitigation responses are a complex
mix of social and ecological concerns, in addition
to conventional profit-maximizing concerns. The
aim is therefore for policy and action to further in-
duce technological change, or, in other words, to ac-
celerate or shift expected endogenous technological
change patterns. Thus, induced technological change
(ITC) implies endogenous technological change, al-
though the latter does not necessary include the for-
mer if it is invariant to mitigation policy. ITC in
the climate context can also be described as the ex-
pansion of substitution possibilities for greenhouse
gas intensive inputs to productionprincipally fossil
fuelsfacilitated by inventive responses to the price
changes induced by policies to mitigate global warm-
ing (see Ref 84, p. 539). Having said this, techno-
logical change for climate mitigation may also be
incurred at the energy demand end and not only
from a supply-side perspective, and can be addition-
ally induced by nonprice incentives (e.g., rules and
regulations).
Therefore, it is important to note that the char-
acterization of technological change at the macroe-
conomic level is crucial in influencing the computa-
tional results of climateeconomy models and giving
support or not to the green growth hypothesis. There
is a consensus in the climate economics literature that
the costs of mitigation decrease significantly as the
representation of technological dynamics in models
shifts from being exogenous to being endogenous and
policy induced.7, 35, 85 Much higher economic costs in
terms of GDP losses relative to a baseline are pro-
jected by models with a pessimistic view of techno-
logical change and limited detail of low-carbon back-
stop technologies, for example, the FUND policy op-
timization model in Ref 86 or the recursive dynamic
CGE model, IMACLIM-R, in Ref 30. The order of
magnitude by which costs are reduced when ITC is
represented relative to a no-ITC modeling approach
(for a given climate stabilization target) varies sub-
stantially across models. Reference35 finds that the ad-
ditional mitigation costs (in terms of percent of Gross
World Product being lost), for the scenarios without
ITC, cover a wide range of around 0.110% across
the models considered in their analysis. This varia-
tion in cost estimates depending largely on how the
components of ITC are captured for both the energy
sector and the macroeconomy. It has been argued, for
Volume 2, May/June 2013
 WIREs Energy and Environment
instance, in Ref 84, that the learning-curve modeling
approach to ITC (characteristic of bottom-up mod-
els) results in more dramatic cost savings compared
to the R&D or knowledge capital approach (specific
to top-down models). In other words, the interpre-
tation and modeling of technological change is cru-
cial for understanding the potential for greening the
economy.
Considering Scale and Limits to Growth
Although climateeconomy modeling may provide
for a promising avenue in terms of better represent-
ing realities on the ground, there is an important
blind spot regarding issues of limits and scale. Both
orthodox optimizing frameworks and (to a lesser ex-
tent) alternative energyenvironmenteconomy mod-
els deal poorly with the issue of scale and growth
and do not fare well in resolving this challenge. This
is surprizing given that there has been substantial
and influential analysis over the last four decades us-
ing so-called integrated assessment modeling. Such
models have become the workhorses of environmen-
tal and climate change policy for assessing climate
change policy and exploring the complex, future in-
teractions between key drivers of anthropogenic emis-
sions such as land and energy use, economic develop-
ment, GHG emissions, the climate system, and ecosys-
tem impacts.87 Modeling done for the 1972 Limits
to Growth publication using the World3 model can
be considered as one of the first operationalizations
of integrated assessment.18 By outlining how envi-
ronmental degradation may eventually lead to col-
lapse, analysis done with this model issued a first
strong wake-up call regarding human interference
with the environment.18, 88, 89 The original World3
model underlying the 1972 publication showed that
with global resource use and emission constraints and
via necessitating the diversion of excessive amounts of
capital to defensive expenditures, welfare would de-
cline over time and growth eventually might come to
a halt by the early 2020s. The 1992 and 2004 up-
dates essentially supported this original message of
overshoot, yet in less drastic language. Surprising
or not, conventional integrated assessment modellers
have not heeded these calls. In most of their analy-
ses, interactions between drivers have been analyzed
in a limited way, and the modeling suggests that these
drivers eventually develop in very different and in-
creasingly irreversible directions. There is the need
for a better analysis and study of these interrelation-
ships, and particularly, the exploration of key feed-
backs leading from drivers of demand for energy and
Volume 2, May/June 2013 
C 2012 John Wiley & Sons, Ltd.
Economic foundations of green growth discourses
land to mitigation and back to income and economic
growth as drivers.90
Although conventional economic modeling ap-
proaches that reflect the issues at the heart of the
conflict between the economic growth imperative and
biophysical limits are scarce throughout the literature,
alternative economic approaches, for instance, based
in the tradition of Refs 9194, and 95 could help
address this conflict.9699 Such models assume a dif-
ferent kind of macroeconomic causality or a different
model closure.100102 Conventional closure rules are
typically full employment of resources due to utility
and profit maximization and saving-determined in-
vestment based on loanable-funds theory. Involuntary
unemployment is ruled out by the assumption that all
prices, including the wage, will adjust until supply
meets demand. Keynesian closures can accommodate
such rare cases, but they also feature involuntary un-
employment. In Keynesian models, the nominal wage
is usually seen as set by past periods or by social
institutions. Causality runs from autonomous saving
and investment decisions to output adjustment in the
usual IS textbook fashion. Realized investment and
consumption plans can be large enough to use all of
available capacity or resources, but mostly they fall
short of this level and involuntary unemployment re-
sults. Demand growth is one way to avoid the social
instability associated with underutilization of partic-
ularly labor resources.
BEYOND GROWTH
CONSIDERATIONS
The bulk of climateeconomy modeling literature dis-
cusses only likely GDP and other standard macroe-
conomic impacts (e.g., welfare losses) resulting from
various climate mitigation regimes and scenarios.
Other anticipated socioeconomic and environmental
effects are rarely investigated, particularly under the
conventional optimization approach to climate eco-
nomics modeling. Exploring beyond growth impacts
is important for understanding the wider spectrum
of benefits and costs that climate control action may
bring in terms of greening growth and the economy.
For example, employment effects are rarely ad-
dressed under the orthodox optimization approach
to climate economics modeling. One exception is the
DSGE modeling approach in the neo-Keynesian spirit,
although the suboptimal use of resource is still treated
via market equilibrium conditions. Another excep-
tion is a recent study that modifies a CGE model
to allow for the variability of the natural rate of
unemployment.54 Unemployment conditions can be
261
Advanced Review
included in the modeling framework as shown by the
neo-classical synthesis, yet then the results are quite
dependent on the specific formulation chosen (see
Ref 75, p. 13). All of the very few macroeconomet-
ric simulation models available in the climate eco-
nomics literature (e.g., E3MG, GINFORS, PANTHA
REI, and NEMESIS) are capable of capturing climate
policy induced employment effects, as their theoret-
ical assumptions on the existence of unemployment
and the modeling of dynamics allow them to do so.
They arguably have greater flexibility in portraying
structural changes within economies subjected to cli-
mate policies. Also, spillover effects and technologi-
cal transfer are poorly modeled, if at all in conven-
tional CGE or optimal growth models, preventing
these from exploring the effects of mitigation policies
on investments and labor market developments.103 In
other words, there is a need for structural macroe-
conomic models that portray capital and trade flows
across countries and across time, and accommodate
for the existence of resource unemployment and their
suboptimal use that respond endogenously to climate
mitigation policies.
One insightful modeling approach developed by
Refs 104 and 105 aims at also capturing effects on
the fiscal position, unemployment, and poverty. These
analyses use a simple dynamic macroeconomic simu-
lation model based on national accounting relation-
ships. They show that social goals, such as mean-
ingful and gainful employment, poverty alleviation,
and low-income inequality can be achieved without
a by-default reliance on sustained economic growth.
As one example, when calibrating the model to the
Canadian economy and testing the implications of an
environmental policy induced slowdown in economic
growth, the economy without further policy measures
would stabilize at a socially undesirable state with
high unemployment and poverty levels. Yet, the au-
thors demonstrate that properly designing policies in-
cluding public investments in renewable resources and
energy efficiency improvements, as well as social poli-
cies in terms of rearranging the time spent producing
resource-intensive goods toward alternative activities
yielding the same or higher well-being can avoid such
an undesirable state. Thus, although growth has been
a panacea for most social problems in the past, this
does not necessarily have to be the case in the future.
Given environmental limits, an improved macroeco-
nomic policy would extend the set of available policy
instruments to maintain economic well-being without
sacrificing the environment while doing so. One key
policy domain of such considerations is labor pol-
icy, which would be required to counteract possible
increases of unemployment in slow- or low-growth
262 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
economies. As the evidence on the effectiveness of
labor policies suggests, unemployment is not neces-
sarily very tightly linked to GDP growth, but can be
well influenced by public intervention and regulation,
often in close collaboration with nonstate actors, such
as labor unions and other civil society organizations.
Key evidence has been reported in a number of Eu-
ropean countries, particularly the Netherlands and
Denmark. Those countries over the last few years
have managed to significantly reduce unemployment
despite relatively slow growth.106
In other words, the configuration of the climate
policy portfolio and the inclusion and timing of var-
ious climate policy measures are crucial for reducing
the costs or even inducing benefits from mitigation ac-
tion. For example, the HERMES macroeconometric
model used in Ref 69 shows that employment im-
pacts for the Belgian economy of the EU 20/20 target
could vary from a net job loss of 16,000 jobs with-
out revenue recycling to a net job creation of 25,000
jobs with revenue recycling. As such, the represen-
tation and understanding of the institutions, policies
and nonprice barriers are also central to explaining
the factors that may be at play in determining green
growth.
Other key potential socioeconomic impacts of
climate policy, such as environmental benefits in terms
of improved health and crop productivity from re-
duced pollution, energy access for poorer households
and other poverty alleviation effects are even less ad-
dressed under the conventional strand dominating the
climate economics literature. However, some of these
are beyond the economic sphere. This implies that
climateeconomy models need to take a stronger in-
terdisciplinary approach and ways for a more effec-
tive dialogue and coupling with models or modules
from other disciplines. Yet again, the approach of
conventional economic thinking has been to include
such impacts under their own modeling settings with-
out changing their core assumptions or without any
real dialogue with models or approaches from other
disciplines or branches of economics. Conceptual ap-
proaches to the issue of climate mitigation and devel-
opment that tackle the complexity of socioeconomic
and institutional realities are gradually emerging, al-
beit at a limited and slow pace. Some example of
conceptual work at this level includes the ecological
macroeconomics approach in Ref 10, the institutional
economics and development approach in Ref 107, or
the multicriteria analysis of prodevelopment climate
policies methodologies put forward by UNEP.108
In short, although the economic foundations of
green growth discourses are slowly emerging, these
continue to be weak and do not as yet provide a
Volume 2, May/June 2013
 WIREs Energy and Environment
sufficiently robust theoretical and methodological
base. Studies investigating the potential for a green
economy heavily favor the orthodox strand of eco-
nomics that has been dominating the mainstream for
quite some time. This is despite the failure of modern
conventional economics to portray socioeconomic re-
alities and effectively deal with contemporary global
challenges such as the climate change problem.
CONCLUDING REMARKS
The core theoretical assumptions underpinning eco-
nomic behavior as seen under orthodox economic
optimization modeling approaches appear to be in-
consistent with the philosophy behind greening the
economy. Green growth discourses are more likely
to improve their scientific and empirical foundations
if they fully acknowledge the role of macroeconomic
policy, and rely more instead on alternative schools
of economic thought and the less explored strands
of mainstream economics such as those following
the Keynesian tradition. A change in development
paradigms toward green economies needs to be ac-
companied by a change in economic paradigms and
a departure from the uncritical acceptance of estab-
lished economic thought. The analysis provided in
this paper on economic model typology and method-
ological approaches applied to climate change miti-
gation policy provides tangible arguments in this re-
spect.
Projected costs from mitigation tend to de-
crease as the climate economics literature expands
and climateenergyeconomy models advance in their
sophistication, complexity, and representation of
socioeconomic and technological system realities.
Orthodox top-down optimization macroeconomic
models monopolized the early climate economics lit-
erature. These provided clear signals: there are high
(if not prohibitive) macroeconomic costs to climate
mitigation, meaning that economic growth would be
inhibited from climate action and that the concept
of green growth is devoid of any practical meaning.
However, the top-down modeling approach has been
increasingly incorporating insights from bottom-up
studies giving rise to a new set of hybrid models,
and, in general, a lowering of the anticipated GDP
costs from climate mitigation. The modeling of en-
dogenous technological processes has advanced sig-
nificantly and its incorporation in climate economy
models renders stricter stabilization targets more tech-
nically and economically feasible.
A series of developments in alternative nonopti-
mization modeling are emerging as a response to the
Volume 2, May/June 2013 
C 2012 John Wiley & Sons, Ltd.
Economic foundations of green growth discourses
shortcomings and the critique that orthodox CGE and
optimal growth models have been receiving. The abil-
ity of macroeconometric models, agent-based models,
and other types of alternative simulation models to
arguably better capture socioeconomic realities and
understand economic behavior has translated in in-
teresting results that often support the idea of prode-
velopment climate policies. Their portrayal of system
dynamics and the suboptimal use of resources by het-
erogeneous rationally bounded agents may offer rel-
evant insights into the various benefits that climate
mitigation and greening the economy could poten-
tially bring. However, climateeconomy models need
to be overall more closely linked to other methodolog-
ical approaches from other relevant disciplines to deal
with the multidimensional nature of green growth and
green economy discourses.
On the other hand, when judged against the
evidence, the greening of growth remains to some ex-
tent oxymoronic, as to date there has been little evi-
dence that absolute decoupling of GDP from energy
use can indeed be achieved on a wide scale. On top,
although there has been substantial analysis over the
last decades on the environmental constraints to eco-
nomic growth using integrated assessment modeling,
economics so far has yet had little to offer in the way
of model-based analysis for studying the interrelation-
ships and tradeoffs spurred by the double objective of
respecting biophysical/climate thresholds and meeting
ever-aspiring growth prospects. This remains an im-
portant blind spot and requires more attention from
the economics profession.
The green growth or green economy paradigm
shift in the policy rhetoric could offer the economics
discipline important opportunities to reinvent and
reassert itself for a better handling of twenty-first
century global challenges, such as that of dangerous
man-made climate change. There are several exciting
strands of new economic thinking that are emerg-
ing as a reaction to the critical limitations of ortho-
dox economics to portraying energyenvironment
economy-social system dynamics across time and
space. On the other hand, policy initiatives on green-
ing the economy continue to be significantly dis-
connected from the meanings and implications of
various (macro)economic theories for sustainability
governance. The sidelining of important competing
schools of economic thought is posing a major threat
to the credibility and legitimacy behind green growth
discourses. It remains to be seen if greening the
economy discourses will significantly change policy-
making toward more sustainable outcomes or spur
new thinking in economics. What is clear though
is that climate economics and (macro)economic
263
Advanced Review
theory, in general, needs to continuously improve,
allow for pluralistic approaches, and increase its role
in effectively supporting governance for sustainable
development.
NOTES
a
Interestingly, this definition only implicitly relates
to the growth imperative by referring instead to hu-
man well-being which may not necessarily translate
in ever-growing consumption and economic output,
as the term green growth more directly implies. In
other words, the green economy philosophy may be
regarded as a milder version of the green growth
paradigm, with more emphasis on the quality of
growth rather than quantitative targets.
b
Optimal growth models under conditions of cer-
tainty and under the assumption of infinite consumers
as homogenous agents, along with competitive mar-
kets and constant returns to scale in production typ-
ically imply that the allocation of resources achieved
by a decentralized economy will be the same as that
chosen by a central planer maximizing the utility of
the representative economic agent.28
c
In the growth model, the equilibrium state not only
is efficient but also optimal in that it maximizes the
single consumers utility over all possible economic
states, where a state of the economy is a time path
of consumption for the consumer and of inputs and
outputs for the firm (see Ref 29, p. 2).
d
The seven model comparison exercises or studies in-
clude three Energy Modeling Forum (EMF) studies
(EMF19,37 EMF21,36 and EMF2238 ; the Inter-Model
Comparison Project (IMCP) study35 ; the ADAM
project39 ; the top-down bottom-up model compari-
son study in Ref 40; and the meta-analysis study in
ACKNOWLEDGMENTS
Financial support from the Austrian National Banks Jubilaumsfonds is gratefully acknowl-
edged.
REFERENCES
1. Rockstrom J, Steffen W, Noone K, Persson A, Chapin
FS III, Lambin EF, Lenton TM, Scheffer M, Folke C,
Schellnhuber HJ, et al. A safe operating space for
humanity. Nature 2009, 461:472475.
264 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
Ref 41. Models with exogenous macroeconomics were
not counted (e.g., the bottom-up energy system mod-
els POLES and TIMER used in the ADAM and EMF
studies).
e
Nonetheless, it is worthwhile mentioning that CGE
models could be in principle empirically grounded
and run in a simulation format. Empirical general
equilibrium models in the climate economics litera-
ture are extremely rare, with an exception being the
dynamic CGE modelLEAN, for the study of envi-
ronmental fiscal reform in Germany (as described in
Ref 44.
f
The majority of DSGE model estimation is under-
taken using Bayesian methods.45
g
Keynesian macroeconomics and neo-Keynesian eco-
nomics were absorbed by the neoclassical paradigm
and is referred to in the economics literature as the
neoclassical, and respectively, new neoclassical syn-
thesis, which dominates mainstream economics.
h
Some examples include the QUEST III new-
Keynesian DSGE model used by the European
Commission,46 a DSGE model for the Polish
economy,47 a DSGE model for China,48 or the SOG
model as described in Ref 49.
i
Some integrated assessment models may also be con-
sidered as simulation models, such as the PAGE
model,56, 57 though the latter is essentially tool that
uses simple equations to simulate the results from
more complex specialized scientific and economic
models, while accounting for uncertainty.58 Also,
energy system models are not de facto part of
the economics literature and have a simple or ex-
ogenous treatment of macroeconomic interactions
(e.g., the IMAGE/TIMER simulation model, which
is also an integrated climatelandenergy assessment
model).59
2. OECD. Greening Development: Enhancing Capac-
ity for Environmental Management and Governance.
Paris: Organisation for Economic Cooperation and
Development; 2012.
Volume 2, May/June 2013
 WIREs Energy and Environment
3. UNEP. Towards a Green Economy. Pathways to
Sustainable Development and Poverty Eradication.
Geneva, Switzerland: United Nations Environment
Programme; 2011. Available at: at: www.unep.org
/greeneconomy.
4. Nadal A. Rethinking Macroeconomics for Sustain-
ability. London/New York: Zed Books; 2011.
5. von Weizsacker E, Hargroves KC, Smith MH, Desha
C, Stasinopoulos P. Factor Five: Transforming the
Global Economy through 80% Improvements in Re-
source Productivity. London, UK/Sterling, VA: Earth-
scan; 2009.
6. Dasgupta S, Laplante B, Wang H, Wheeler D. Con-
fronting the environmental Kuznets curve. J Econ
Perspect 2002; 16:147168.
7. IPCC. Summary for policymakers. In: Metz B, David-
son OR, Bosch PR, Dave R, Meyer LA, eds. Climate
Change 2007: Mitigation. Contribution of Working
Group III to the Fourth Assessment Report of the
Intergovernmental Panel on Climate Change. Cam-
bridge, UK/New York: Cambridge University Press;
2007.
8. Sorrell S, Dimitriopolous J. The rebound effect: mi-
croeconomic definitions, limitations and extensions.
Ecol Econ 2007, 65:636649.
9. Colander D. The death of neoclassical economics. J
Hist Econ Thought 2000, 22:127143.
10. Harris JM. Ecological Macroeconomics: Consump-
tion, Investment and Climate Change. GDEI Work-
ing Paper No. 0802. Medford, MA: Global Devel-
opment and Environment Institute, Tufts University;
2008.
11. Narita D, Tol RSJ, Anthoff D. Economic costs of ex-
tratropical storms under climate change: an applica-
tion of FUND. J Environ Plan Manag 2010, 53:371
384.
12. Nordhaus W. A Question of Balance. Weighing the
Options on Global Warming Policies. New Haven,
CT: Yale University Press; 2008.
13. Nordhaus WD. Economic aspects of global warming
in a post-Copenhagen environment. Proc Nat Acad
Sci USA 2010, 107:1172111726.
14. Georgescu-Roegen N. The Entropy Law and the Eco-
nomic Process. Cambridge, MA: Harvard University
Press; 1971.
15. Ayres RU, van den Berg JCJM, Gowdy JM
Viewpoint: Weak versus Strong Sustainability.
Discussion Paper 98-103/3, Rotterdam, The Nether-
lands: Tinbergen Institute; 1998. Available at:
http://www.tinbergen.nl/ti-publications/discussion-
papers.php?paper=1257 .
16. Ayres RU, Warr B. The Economic Growth Engine:
How Energy and Work Drive Material Prosperity.
Cheltenham and Northampton, UK: Edward Elgar
Publishing; 2009.
Volume 2, May/June 2013 
C 2012 John Wiley & Sons, Ltd.
Economic foundations of green growth discourses
17. Smil V. Energy at the Crossroads: Global Perspectives
and Uncertainties. Cambridge, MA: The MIT Press;
2005.
18. Meadows D, Meadows D, Randers J, Behrens WW.
The Limits to Growth: A Report for the Club of
Romes Project on the Predicament of Mankind, New
York: Universe Books; 1972.
19. Daly H. Toward a Steady-State Economy. San Fran-
cisco: Freeman WH; 1973.
20. Harris JM, Goodwin NR. Reconciling growth and
environment. In: Harris JM, Goodwin NR, eds.
New Thinking in Macroeconomics. Cheltenham and
Northampton, UK: Edward Elgar Publishing; 2003.
21. Spash CL, Schandl H. Growth, the Environment and
Keynes: Reflections on Two Heterodox Schools of
Thought. CSIRO Working Paper Series 200901.
Canberra, Australia: CSIRO Sustainable Ecosystems;
2009.
22. Tol RSJ. Climate coalitions in an integrated assess-
ment model. Comput Econ 2001, 18:159172.
23. Tol RSJ. Multigas emission reduction for climate
change policy: an application of FUND. Energy J
(MultiGreenhouse Gas Mitigation and Climate Pol-
icy Special Issue): 2006, 235250.
24. Anthoff D, Tol RSJ. The Uncertainty about the So-
cial Cost of Carbon: A Decomposition Analysis using
FUND. ESRI Working Paper No.404. Dublin, Ire-
land: Economic and Social Research Institute; 2011.
25. Ackerman F. Still dead after all these years: interpret-
ing the failure of general equilibrium theory. J Econ
Method 2002, 9:119139.
26. Stanton EA, Ackerman F, Sivan K. Inside the inte-
grated assessment models: four issues in climate eco-
nomics. Climate Develop 2009, 1:166184.
27. Kohler J, Grubb M, Popp D, Edenhofer O. The transi-
tion to endogenous technological change in climate-
economy models: a technical overview of the Inno-
vation Modeling Comparison Project. Energy J (Spe-
cial Issue: Endogenous Technological Change and the
Economics of Atmospheric Stabilisation) 2006, 17
55.
28. Kemfert C. Applied economic-environment-energy
modeling for quantitative impact assessment. In
Amelung B, Rotmans J, Valkering P, eds. Integrated
Assessment for Policy Modelling. 2003.
29. Bewley TF. General Equilibrium, Overlapping Gen-
erations Models and Optimal Growth Theory. Cam-
bridge, MA: Harvard University Press; 2007.
30. Crassous R, Hourcade JC, Sassi O. Endogenous struc-
tural change and climate targets modeling experi-
ments with IMACLIM-R. Energy J (Special Issue: En-
dogenous Technological Change and the Economics
of Atmospheric Stabilisation) 2006, 259276.
31. Lejour A, Veenendaal P, Verweij G, van Leeuwen
N. WorldScan: a Model for International Economic
265
Advanced Review
Policy Analysis. Hague, The Netherlands: CPB
Netherlands Bureau for Economic Policy Analysis;
2006.
32. Kainuma M, Matsuoka Y, Morita T, eds. Climate
Policy Assessment: Asia-Pacific Integrated Modeling.
Tokyo: Springer-Verlag; 2003.
33. Burniaux JM, Chateau JJ. An Overview of the
OECD ENV-Linkages Model. Working Paper No.
653. Paris: OECD Economics Department; 2008.
34. Grubb M, Carraro C, Schellnluber J. Technologi-
cal change for atmospheric stabilization: introduc-
tory overview to the innovation modeling comparison
project. Energy J (Special Issue: Endogenous Techno-
logical Change and the Economics of Atmospheric
Stabilisation): 2006, 116.
35. Edenhofer O, Lessmann K, Kemfert C, Grubb M,
Kohler J. Induced technological change: exploring its
implications for the economics of atmospheric stabi-
lization. Synthesis report from the innovation mod-
elling comparison project. Energy J (Special Issue: En-
dogenous Technological Change and the Economics
of Atmospheric Stabilisation) 2006, 57107.
36. Weyant JP, de la Chesnaye FC, Blanford GJ.
Overview of EMF-21: multigas mitigation and
climate policy. Energy J (Special Issue: Multi-
Greenhouse Gas Mitigation and Climate Policy)
2006, 3:132.
37. Weyant JP. Introduction and overview. Energy Econ
2004, 26:501515.
38. Clarke L, Edmonds J, Krey V, Richels R, Rose S,
Tavoni M. International climate policy architectures:
overview of the EMF 22 international scenarios. En-
ergy Econ 2009; 31(Special Issue):S64S81.
39. Edenhofer O, Knopf B, Barker T, Bauer N, Baum-
stark L, Criqui P, Held A, Isaac M, Jakob M, Jochem
E, et al. The economics of low stabilization: model
comparison of mitigation strategies and costs. Energy
J (Special issue 1 The Economics of Low Stabiliza-
tion) 2010, 31: 1148.
40. van Vuuren DP, Hoogwijk M, Barker T, Riahi K,
Boeters S, Chateau J, Scrieciu S, van Vliet J, Masui T,
Blok K, et al. Comparison of top-down and bottom-
up estimates of sectoral and regional greenhouse gas
emission reduction potentials. Energy Policy 2009,
37:51255139.
41. Barker T, Kohler J, Villena M. The cost of green-
house gas abatement: a meta-analysis of post-SRES
mitigation scenarios. Environ Econ Policy Stud 2002,
5:135166.
42. Barker T, Scrieciu S. Modelling Low Stabilization
with E3MG: towards a New Economics approach to
simulating energy-environment-economy system dy-
namics. Energy J (Special issue 1 The Economics of
Low Stabilization) 2010, 31:137164.
43. Barker T, Anger A, Chewpreecha U, Pollitt H. A new
economics approach to modelling policies to achieve
266 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
global 2020 targets for climate stabilisation. Int Rev
Appl Econ (Special issue: Economic Policies of the
New Thinking in Economics) 2012, 26:205211.
44. Bach S, Kohlhaas M, Meyer B, Praetorius B, Welsch
H. The effects of environmental fiscal reform in
Germany: a simulation study. Energy Policy 2002,
30:803811.
45. Herbst E. Gradient and Hessian-Based MCMC for
DSGE Models. Econometrics workshop paper. Uni-
versity of Pennsylvania, PA; 2010.
46. Conte A, Labat A, Varga J, Zarnic Z. What is the
growth potential of green innovation? An assessment
of EU climate change policies. ECFIN Economic Pa-
per 413, European Commission; 2010.
47. Bukowski M, Kowal P. Large-Scale, Multi-Sector
DSGE Model as a Climate Policy Assessment Tool.
Macroeconomic Mitigation Options (MEMO) Model
for Poland. Warsaw, Poland: IBS working paper
nr.3/2010, Institute for Structural Research; 2010.
48. Schenker O. How Uncertainty Reduces Greenhouse
Gas Emissions. Research paper 2011/01. Universitat
Bern: NCCR Climate, Swiss Climate Research; 2011.
49. Bahn O, Haurie A, Malhame R. A stochastic control
model for optimal timing of climate policies. Auto-
matica 2008, 44:15451558.
50. Fisher-Vanden K, Lanzi E, Popp D, Wing IS, Webster
M. Adaptation and technological change. Presenta-
tion for the US Environmental Protection Agency and
US Department of Energy. Improving the Assessment
and Valuation of Climate Change Impacts for Policy
and Regulatory Analysis. Washington, D.C.; 2010.
51. Kelly DL, Kolstad CD. Integrated assessment models
for climate control. In Folmer H, Tietenberg T, eds.
International Yearbook of Environmental and Re-
source Economics 1999/2000: A Survey of Current
Issues. Cheltenham, UK: Edward Elgar; 1999.
52. Geisendorf S. Do we believe in climate change?
A multi-agent climate-economic model. Papers on
agent-based economics 3. Witzenhausen, Germany:
Institute of Economics, University of Kassel; 2009.
53. Rezai A, Foley DK, Taylor L. Global warming and
economic externalities. Econ Theory 2012, 49:329
351.
54. Jaeger CC, Paroussos L, Mangalagiu D, Kupers R,
Mandel A, Tabara JD. A New Growth Path for Eu-
rope: Generating Prosperity and Jobs in the Low-
Carbon Economy. Synthesis Report. A Study Com-
missioned by the German Federal Ministry for the En-
vironment, Nature Conservation and Nuclear Safety;
2011.
55. Lutz C. How to increase global resource productiv-
ity? Findings from modelling in the petrE project.
In: Bleischwitz R, Welfens PJJ, Zhang H, eds. In-
ternational Economics of Resource Efficiency: Eco-
Innovation Policies for a Green Economy. Berlin-
Heidelberg: Springer-Verlag; 2011, 14:317334.
Volume 2, May/June 2013
 WIREs Energy and Environment
56. Hope C. The marginal impact of CO2 from
PAGE2002: an integrated assessment model incor-
porating the IPCCs five reasons for concern. Integr
Assess J 2006, 6:1956.
57. Hope C. Discount rates, equity weights and the so-
cial cost of carbon. Energy Econ 2008, 30:1011
1019.
58. Hope C. The PAGE09 Integrated assessment model:
A Technical Description. Cambridge Judge Business
School Working Papers 4/2011. Cambridge, UK: Uni-
versity of Cambridge; 2011.
59. Bouwman L, Kram T, Klein-Goldewijk KK. Inte-
grated Modelling of Global Environmental Change.
An Overview of IMAGE 2.4. Bilthoven, The
Netherlands: Netherlands Environmental Assessment
Agency; 2006.
60. ILO. Economic Theories and Methodologies to As-
sess the Impact of Climate Change on Employment.
EC-IILS Joint Discussion Paper Series No. 11. Inter-
national Labour Organisation, International Institute
for Labour Studies; 2010.
61. Chewpreecha U, Pollitt H. Extending the E3ME
Model to 2050: An Introduction to E3ME, Ver-
sion 4.7. Cambridge, UK: Cambridge Econometrics;
2009. Available at: http://94.76.226.154/Libraries/
Downloadable_Files/2050.sflb.ashx.
62. Scasny M, Pollitt Chewpreecha HU, Psa V. Analyz-
ing macroeconomic effects of energy taxation by the
econometric E3ME model. Czech J Econ Finan 2009,
59:460491.
63. Junankar S, Lofsnaes O, Summerton P. MDM-E3:
A Short Technical Description. Cambridge Econo-
metrics, UK: Cambridge Econometrics Working
Paper; 2007. Available at: http://www.camecon.com/
Libraries/Downloadable_Files/MDM_WorkingPaper
.sflb.ashx.
64. Barker T, Ekins P, Foxon T. The macro-economic
rebound effect and the UK economy. Energy Policy
2007, 35:49354946.
65. Meyer B, Lutz C. IO, macro-finance, and trade
model specification. In Uno K, ed. Economy-Energy-
Environment Simulation: Beyond the Kyoto Proto-
col. London: Kluwer Academic Publishers; 2002, pp.
5568.
66. Meyer B, Lutz C. The GINFORS model: model
overview and evaluation. In: Resource Productivity,
Environmental Tax Reform and Sustainable Growth
in Europe. petrE project paper. (Funded by the Anglo-
German foundation as part of its Creating Sustain-
able Growth in Europe project). Osnabruck, Ger-
many: petrE project; 2007.
67. Lutz C, Meyer B, Wolter MI. The global multisec-
tor/multicountry 3-E model GINFORS. A description
of the mode and a baseline forecast for global energy
demand and CO2 emissions. Int J Global Environ
Issues 2010, 10:2545.
Volume 2, May/June 2013 
C 2012 John Wiley & Sons, Ltd.
Economic foundations of green growth discourses
68. Meyer B, Ewerhart G. Multisectoral policy modelling
for environmental analysis. In: Uno K, Bartelmus P,
eds. Environmental Accounting in Theory and Prac-
tice. Amsterdam: 1998, pp. 395406.
69. Bossier F, Devogelaer D, Gusbin D, Verschueren F.
Impact of the EU Energy and Climate Package on
the Belgian Energy System and Economy. Working
Paper 2108 (study commissioned by the Belgian fed-
eral and three regional authorities). Brussels: Federal
Planning Bureau; 2008.
70. Douglas M, Wildavski A. Risk and Culture: An Essay
on the Selection of Technological and Environmen-
tal Dangers. Berkeley, CA/Los Angeles: University of
California Press; 1982.
71. Windrum P, Fagiolo G, Moneta A. Empirical val-
idation of agent-based models: alternatives and
prospects. J Artif Soc Soc Simul 2007, 10:8. Avail-
able at: http://jasss.soc.surrey.ac.uk/10/2/8.html.
72. Beckenbach F, Briegel R. Multi-agent modeling of
economic innovation dynamics and its implications
for analyzing emission impacts. Int Econ Econ Policy
2010, 7:317341.
73. Janssen M, de Vries B. The battle of perspectives: a
multi-agent model with adaptive responses to climate
change. Ecol Econ 1998, 26:4365.
74. Konijn PJA. The Make and Use of Commodities
by Industries. On the Compilation of Input/Output
Data from the National Accounts. Enschede, The
Netherlands: Universiteit Twente, Faculteit Bestu-
urskunde; 1994.
75. Jeeninga H, Weber C, Maenpaa I, Rivero F, Garca
Wiltshire V, Wade J. Employment impacts of energy
conservation schemes in the residential sector:
calculation of direct and indirect employment effects
using a dedicated input/output simulation approach.
ECN: SAVE Contract XVII/4.1031/D/97032;
1999.
76. Grubb M, Edmonds J, Ten Brink P, Morrison M.
The costs of limiting fossil-fuel CO2 emissions: a sur-
vey and analysis. Annu Rev Energy Environ 1993,
18:397478.
77. Hourcade JC, Shukla P. Global, regional and national
costs and ancillary benefits of mitigation. In Metz B,
Davidson O, Swart R, Pan J, eds. Climate Change
2001: Mitigation. Cambridge, UK: Cambridge Uni-
versity Press; 2001.
78. Seebregts AJ, Goldstein GA, Smekens K. En-
ergy/environment modeling with the MARKAL fam-
ily of models. ECN Report. Energy Research Cen-
tre of the Netherlands and International Resources
Group 2001.
79. Nordhaus WD. Modeling induced innovation in
climate-change policy. In: Grubler A, Nakicenovic
N, Nordhaus WD, eds. Technological Change and
the Environment. Washington, D.C.: Resources for
the Future Press; 2002, 182209.
267
Advanced Review
80. Messner S, Schrattenholzer L. MESSAGE-MACRO:
linking an energy supply model with a macroeco-
nomic model and solving it interactively. Energy
2000, 25:267282.
81. Leimbach M, Bauer Baumstark NL, Edenhofer O.
Mitigation costs in a globalized world: climate pol-
icy analysis with REMIND-R. Environ Model Assess
2010, 15:155173.
82. Kypreos S, Bahn O. A MERGE model with endoge-
nous technological progress. Environ Model Assess
2003, 8:249259.
83. Romer PM. Endogenous technological change. J
Politic Econ 1990, 98:S71S102.
84. Wing IS. Representing induced technological change
in models for climate policy analysis. Energy Econ
2006, 28:539562.
85. Grubb M, Kohler J, Anderson D. Induced technical
change in energy and environmental modeling: ana-
lytic approaches and policy implications. Annu Rev
Energy Environ 2002, 27:271308 .
86. Tol RSJ. The feasibility of low concentration targets:
an application of FUND. Energy Econ 2009, 31(Spe-
cial Issue):S121-S130.
87. van Vuuren DP, Isaac M, Kundzewicz ZW, Arnell N.,
Barker Criqui TP, Bauer N, Berkhout F, Hilderink
H, Hinkel J, Hof A, Kitous A, Kram T, Mechler R,
Scrieciu S. The use of scenarios as the basis for com-
bined assessment of climate change mitigation and
adaptation. Global Environmental Change (Special
Issue on The Politics and Policy of Carbon Capture
and Storage) 2011, 21:575591.
88. Meadows DH, Meadows DL, Randers J. Beyond
the Limits: Confronting Global Collapse, Envision-
ing a Sustainable Future? White River Junction, VT:
Chelsea Green Publishing; 1992.
89. Meadows D, Randers J, Meadows D. Limits to
Growth: the 30 Year Update. White River Junction,
VT: Chelsea Green Publishing; 2004.
90. Moss RH, Edmonds JA, Hibbard KA, Manning MR,
Rose SK, van Vuuren DP, Carter TR, Emori S,
Kainuma M, Kram T, et al. The next generation of
scenarios for climate change research and assessment.
Nature 2010, 463:747756.
91. Kalecki M. Selected Essays on the Dynamics of the
Capitalist Economy: 19331970. Cambridge, UK:
Cambridge University Press; 1971.
92. Keynes JM. The General Theory of Employment, In-
terest, and Money. London: Macmillan; 1936.
93. Harrod RF. An essay in dynamic theory. Econ J 1939,
49:1433.
94. Domar ED Capital expansion, rate of growth, and
employment. Econometrica 1946, 14:137147.
268 
C 2012 John Wiley & Sons, Ltd.
wires.wiley.com/wene
95. Kaldor N. Capital accumulation and economic
growth. In Lutz FA, Hague DC, eds. The Theory of
Capital Accumulation. London: Macmillan; 1961.
96. Gowdy JM. Bioeconomics and post Keynesian eco-
nomics: a search for common ground. Ecol Econ
1991, 3:7787.
97. Holt RPF, Pressman S, Spash CL. Post Keynesian and
Ecological Economics: Confronting Environmental
Issues. Cheltenham and Northampton, UK: Edward
Elgar Publishing; 2009.
98. Kronenberg T. Finding common ground between
ecological economics and post-Keynesian economics.
Ecol Econ 2010, 69:14881494.
99. Spash CL The economics of climate change impacts a
la Stern: novel and nuanced or rhetorically restricted?
Ecol Econ 2007, 63:706713.
100. Sen AK Neo-classical and neo-Keynesian theories of
distribution. Econ Record 1963, 39:5364.
101. Taylor L, Lysy FJ. Vanishing income redistributions:
Keynesian clues about model surprises in the short
run. J Develop Econ 1979, 6:1129.
102. Taylor L Reconstructing Macroeconomics: Struc-
turalist Proposals and Critiques of the Mainstream.
Cambridge, MA: Harvard University Press; 2004.
103. Barker T, Bashmakov I, Alharthi A, Amann M, Ci-
fuentes L, Drexhage J, Duan M, Edenhofer O, Flan-
nery B, Grubb M, et al. Mitigation from a cross-
sectoral perspective. In: Metz B, Davidson OR, Bosch
PR, Dave R, Meyer LA, eds. Climate Change 2007:
Mitigation Contribution of Working Group III to the
Fourth Assessment Report of the Intergovernmen-
tal Panel on Climate Change. Cambridge, UK/New
York: Cambridge University Press; 2007.
104. Victor P, Rosenbluth G. Managing without growth.
Ecol Econ 2007, 61492504.
105. Victor P. Managing without Growth. Slower by De-
sign, Not Disaster. Cheltenham and Northampton,
UK: Edward Elgar Publishing; 2008.
106. Auer E. Employment Revival in Europe: Labour Mar-
ket Success in Austria. Geneva: International Labour
Office; 2000.
107. Halsnaes K, Verhagen J. Development based climate
change adaptation and mitigation conceptual issues
and lessons learned in studies in developing countries.
Mitigat Adapt Strateg Global Change 2007, 12:665
684.
108. Scrieciu S, Bristow S, Puig D. MCA4climate: a practi-
cal framework for planning pro-development climate
policies. UNEP report. Division of Technology, In-
dustry and Economics, Energy Branch, United Na-
tions Environment Programme; 2011. Available at:
www.mca4climate.info.
Volume 2, May/June 2013