The resilience dividend: A tractable climate-economy model

This paper develops a quantitative, analytically tractable, closed-form climate-economic model to study mitigation and adaptation policies. We identify a “resilience dividend” under baseline scenarios, where avoided long-run climate damages substantially exceed the economic costs of moderate policy intervention. Conversely, delayed intervention imposes a dual burden: even aggressive late-stage abatement fails to counteract thermal and atmospheric inertia in the medium term, escalating cumulative costs, while inducing sustained temperature overshoot. When incorporating exogenous technological progress or quadratic climate damages, the model aligns with recent empirical evidence on catastrophic risks, demonstrating that highly stringent policy action transitions from a discretionary choice to an economic imperative. Finally, an extension incorporating the structural shift toward intangible capital reveals that digitalization alters long-term decarbonization pathways depending on whether dematerialization gains outweigh computational energy demand. Overall, the findings indicate that decisive, front-loaded climate policy serves as an indispensable foundation for long-term macroeconomic stability and prosperity.