Temperature Shocks: Growth and Unemployment in the EU
There are lots of shocks hitting the European Union ( EU ), for example Energy Shocks and Floods, Drought and Heat Waves . In this post, I'm going to look at the effect of Surface Temperature shocks on the EUL20 Model . The EUL20 Model has three component state variables: EU1 = (Growth), EU2 = (CO2-LU) and EU3 = (LU-GDP-N), that is, Overall Growth, a controller for CO2 Emissions-Unemployment (LU) and a controller for Unemployment-Output-Population. From the shock decomposition diagram above, a global temperature shock has negative effects on all three state variables (see the EUL20 TEMP Model below). In each case, the system responds positively after a few years but does not return to full equilibrium until around ten years. In other words, repeated yearly temperature shocks will cumulate and continue damaging the economy over time. Source: European Environmental Agency Additionally, over time, surface temperatures in ...