So, this baseline economy has a GDP level of 102 in year 1, 104 in year 2, etcetera. Suppose the economy has size 100 in year 0, then the size of the economy is 110 in year 5. So, let us assume a baseline GDP growth of 2% per year. The GDP numbers in the table need to be interpreted as relative to the baseline.
On whether this is low, high or outrageous we can debate, but if fully passed on to consumers it would make a round trip Amsterdam – New York US$ 200 more expensive. In the Dutch Central Bank scenario Kirk refers to we model the impact of a US$ 100 increase in the carbon price.
Robert Vermeulen of the Dutch Central Bank wrote (in personal capacity, and with extraordinary politeness given the circumstances) to defend their calculations: And here, whether a carbon tax could do that. We are talking about "transition risk," the chance that our legislators take such extreme action that their carbon policies cause a financial meltdown of systemic proportions. Here we are not talking about the fantasy that in the next 5 years or so, on the scale of actual bank investments and regulatory horizon, some physical "climate" event will destroy the financial system. I wrote a review of Stuart Kirk's climate finance speech, which among other things criticized the Dutch Central Bank for putting fingers on the scale in order to make "climate financial risk" look bigger than it is.
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