Balancing climate policies and economic development in the Mediterranean countries

The goal of this work is to improve the spatial representation of the Regional Dynamic Integrated model of Climate and the Economy (RICE), focusing on the Mediterranean countries, as this area is considered as an hot-spot for climate change. The model is updated with a 2015 base year calibration, providing projections till the end of the century We evaluate the impact of climate damages and temperature changes in several scenarios, drawing comparisons across regions. Due to the analytical structure of the model, which considers energy as an explicit input factor, we examine macroeconomic and energy indicators across regions. We find that limiting temperature increase up to 2 °C with respect to pre-industrial levels requires a carbon tax/social cost of carbon of more than USD 200/tC by 2055, doubling by the end of this century, with countries belonging to lower-income regions and those in the southern part of the Mediterranean facing the most severe consequences in terms of economic losses. Our results are embedded in a framework showing the costs of delaying the energy transition. Our figures rely on fossil-fuel inputs for energy production and exogenous technological change.