Field of Research

Macroeconomics, Environmental Economics

Research Topics

Economic Growth and the Natural Environment

Overview of Research

Today we face many environmental problems, and solving these is one of the main challenges of our time. Should economic activities that affect the natural environment be reduced? Is economic growth unnecessary? I believe that economic growth is necessary to improve the environment. Without economic growth the present educational resources for children will become inadequate, and technological development in the near future will be much reduced. As a result, the standard of living of future generations may be lower than it is now. Conversely, economic growth will increase the resources for improving education and health standards. Research and development may also produce technologies that remove greenhouse gases and aerosols from the atmosphere, and marine debris from the oceans. Technological progress will enable the production of better quality alternative products without depleting natural resources.

I mainly use dynamic macroeconomic models to analyze economic growth and environmental policies. However, the most-frequently used models are not necessarily the best. For example, the DICE model developed by William Nordhaus, who won the Nobel Prize in Economics, is very often used in the analysis of climate change policy. The DICE model integrates climate change and macroeconomic models, and the relationship between greenhouse gases and temperature change is complex. We analyzed such a complex expression and demonstrated that a simplified model can be used to replicate the long-term carbon dioxide accumulation path shown by the original DICE model.

Another aspect is the risk to society of damage and catastrophes, due to the destruction of nature. This risk is uncertain, so it is necessary to extend and improve models that do not allow for uncertainty. Individual risk attitudes, the manner of assessment of future living standards, and how production and CO2 reduction technologies are incorporated into the model are all important in the analysis of desirable policies. The following figures analyze the impact of global warming, comparing a simple model with one incorporating catastrophic risk, and also with one where the assumption of reduction of technology is relaxed. The long-term consumption path (left figure) is not significantly different, but long-term social cost of carbon dioxide (optimal carbon tax; right figure) varies greatly depending on the model.

Both figures are based on Ikefuji, Laeven, Magnus, Muris, 2021. “DICE Simplified.” Environmental Modeling and Assessment, 26, 1-12.

Economic activities and the natural environment are closely interdependent and often, but not always, a trade-off. I hope that students will acquire the knowledge of economics and the analytical skills required to discuss the best and most practical environmental policies that can be implemented in a society composed of people with diverse values, rather than asserting opinions on environmental protection based solely on ideals.

IKEFUJI, Masako 
Professor
Degree: Ph.D. in economics (Osaka University)
ikefuji@osipp.osaka-u.ac.jp