Modeling climate change effects on renewable and non-renewable resources

Abstract

This paper models climate change effects differentiating across primary commodities based on their exhaustibility factor. There is a direct pass-through to futures prices, but the impact differs across diverse commodity groups. This paper develops a theoretical model simulating dynamic consumption paths of renewable and non-renewable resources. Dynamic paths are calculated applying the Non-linear Model Predictive Control (NMPC) methodology. Current analysis draws a clear connection between intensifying impacts of climate change, commodity futures price volatility, rising urban-dependency pressures and the renewable and non-renewable resources production and consumption balance among advanced and emerging economies. Accumulated evidence suggests probable higher volatility in commodity prices in the near term, directly affecting small and large economies across all regions.