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Perspectives on Future Directions

This session considered how to advance research on systemic risk assessment related to climate and macroeconomic dynamics. It started with a panel offering different sectoral and institutional perspectives on this challenge—both academic and practical—before participants discussed examples of future research topics in structured breakouts. Panelists were Ruth Richardson (Accelerator for Systemic Risk Assessment [ASRA]), Katherine Mach (University of Miami), Estaban Rossi-Hansberg (University of Chicago), Brian O’Neill (Pacific Northwest National Laboratory), and Tony Smith (Yale University). They discussed many opportunities to advance research, such as a comprehensive framework for understanding the multifaceted risks of climate change, transdisciplinary research, advanced modeling techniques, and inclusive governance.

SYSTEMIC RISK ANALYSIS

Ruth Richardson explained that ASRA aims to rethink risk to expedite transformative action that safeguards Earth’s ecological system and humanity from escalating systemic risks; they have a collaborative, transdisciplinary, and diverse network around the world. She outlined five key areas for advancing systemic risk analysis:

1. Creating and supporting systemic and transdisciplinary processes, platforms, and networks. She emphasized the importance of accelerating research to model complex, interconnected risk, cascading impacts, and feedback loops across domains, such as technology,

1. climate, health, peace and security, migration, poverty, and biodiversity. She challenged participants to go beyond climate and macroeconomics to delve deeper into the transdisciplinary.
2. Broadening the scope of science and evidence. She suggested that researchers embrace polyepistemologies and incorporate insights from diverse knowledge holders. She stressed the importance of researchers more fundamentally understanding the difficult questions of equity, justice, and inclusion, aiming for multidimensional outcomes and goals.
3. Focusing on transformative actions. Despite different interpretations of this, she said it could be challenging outdated mental models and fundamental systems to move beyond the status quo, such as refitting outdated infrastructure, as described by Chester.
4. Embracing uncertainty. This is necessary in actions, responses, policy, and decision making. She encouraged humility in acknowledging what is unknown and unknowable.
5. Realizing opportunities for new institutions, structures, and processes. For example, she said, this may involve dismantling legacies of bureaucratic structures and creating new processes for co-developing and enacting strategies to reduce risk. She also stressed the importance of transparency and open access to data.

Richardson highlighted the importance of enhancing researchers’ capacities and capabilities to effectively communicate their work to shape public discourse, connect research to decision making, bridge disciplinary divides, and prioritize holistic, systemic, transdisciplinary research. Last, she asked about how to attract funders to support transdisciplinary research.

COMPLEX SYSTEMS ASSESSMENT

Katharine Mach reflected on the challenges of addressing climate change complexity, drawing from her involvement in the recent National Climate Assessment.¹ She questioned whether scientific efforts adequately confront the complexity of climate change to meet decision-making needs. She highlighted three opportunities for future research themes:

1. Integration of disciplines. She suggested improved integration to comprehensively understand climate change impacts and intersectionality. She said that modeling often focuses on a median household, which often fails to capture different impacts accurately. She highlighted the significance of studying understudied areas and

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¹ See https://nca2023.globalchange.gov.

1. populations, particularly diverse communities experiencing disproportionate burdens. She emphasized the importance of recognizing the varied roles of social systems and services for different individuals, which is often overlooked in modeling efforts.
2. Collaboration among diverse knowledge holders. She stressed the importance of collaborative processes in knowledge production, recognizing diverse perspectives, expertise, and experiences as crucial to the research process. She suggested collaboration with boundary organizations to bridge research and practice.
3. Evolution of governance spaces. She encouraged greater attention to the evolving complexity of governance in response to climate change. She highlighted the increasing number of actors, institutions, and policies, emphasizing the benefit of ongoing monitoring, evaluation, and research to ensure effective risk reduction. Mach deemed institutional learning and transformation over time as crucial for achieving the necessary flexible, inclusive series of adjustments to respond to climate change.

Mach suggested reframing research structures and practices to better support transdisciplinary research and practice, acknowledging both emerging successes and areas where improvements may be beneficial.

OPPORTUNITIES FOR ECONOMIC MODELING

From an economics perspective, Esteban Rossi-Hansberg discussed important directions for advancing economic methodologies, especially for addressing the impact of climate change on the economy. He suggested a few examples of future research opportunities and investment to advance these kinds of economic models:

1. Addressing heterogeneous impacts across locations. He emphasized the importance of developing models to capture the spatial heterogeneity of climate change impacts and the spatial adaptation of the economy to understand and address economic consequences effectively.
2. Developing systematic methodologies. He stressed the benefit of investing in developing systematic methodologies. Although economists are working on creating structures to model the spatial adaptation of the economy to climate impacts, he noted an opportunity for methodological development to enhance prediction accuracy.
3. Incorporating richness of climate impacts. He suggested an opportunity to develop structures and models that can encompass the full range of climate impacts to improve the accuracy of economic

1. estimations beyond basic effects currently accounted for in existing models.
2. Enabling quick computation of models. He underscored the need and opportunity for models that can be solved quickly and efficiently for practical applications. He noted that quick model computation is essential for estimating elasticities related to how people react to climate shocks, such as changing locations or investing in different places.
3. Investing in model development. To advance the understanding of the impact of climate change on the economy, he emphasized the importance of investing in the construction of models capable of handling spatial complexities, providing quick computations, and incorporating diverse climate impacts.

Rossi-Hansberg highlighted that advancing complex spatial adaptation models likely requires a combination of methodological development, efficient computational solutions, and a comprehensive understanding of the spatial and dynamic nature of economic activities in response to climate change.

Tony Smith discussed his work on constructing a laboratory to study the heterogeneous impacts of climate change globally and the varied responses or impacts of different climate policies. Like Rossi-Esteban, Smith emphasized the importance of fully articulated, dynamic, quantitative economic models that incorporate spatial details and the behavior of agents, firms, and consumers. He highlighted the benefit of economic models being a general equilibrium system, allowing for the full response of agents, firms, and consumers to policy changes, including endogenous responses such as relocation and price adjustments.

Smith mentioned ongoing projects, such as integrating the Norwegian Earth System model with his spatial general equilibrium model to incorporate extreme events. He stressed the significance of considering weather alongside climate and the challenge of modeling the shifting climate distribution.

Drawing from Fried’s discussion on aggregate versus idiosyncratic risk, Smith emphasized the spatial variability of climate change impacts, underscoring the need for spatial considerations. Moreover, he highlighted the benefit of developing a shared language and complementary modeling approaches; he acknowledged the concern from some non-economists that economic models may oversimplify human behavior, so he encouraged collaborating with anthropologists and sociologists to improve models of human behavior.

Regarding research opportunities, Smith expressed the importance of funding support for computations, both software and hardware, to handle the complexity of models with heterogeneous actors. He also expressed the

need to address the challenge of integrating different timescales in economic and Earth system models and to collect more detailed data on damages. Last, he emphasized the value of funding collaborative research teams to tackle the complexity of climate impact studies effectively.

CASCADING RISKS

Brian O’Neill reflected on future research directions stemming from discussions on cascading or compounding risks from the workshop. He outlined three key areas:

1. Qualitative descriptions of cascading risks. He suggested a low-technology solution involving creating qualitative descriptions outlining various cascading risks. He said that this exercise could draw from different disciplines to identify risks cascading across society and the economy, serving as a basis for evaluating the effectiveness of existing models or the need for alternative approaches.
2. Consideration of transition and physical risks concurrently. He stressed the importance of simultaneously considering transition and physical risks of climate change, especially given the significant impacts when these risks occur together. He cited examples such as heat waves affecting an energy system that was already coping with intermittency issues with renewable sources or increasing demand for biomass during the transition to low-carbon energy sources leading to competition for land with a food system also coping with climate impacts.
3. Large-scale modeling improvements. He highlighted several methods to improve large-scale modeling, including distinguishing subpopulations to capture differential impacts, introducing heterogeneity, and incorporating extreme events and responses to them.

O’Neill’s reflections emphasized the importance of developing clearer descriptions of cascading risks, considering both physical and transition risks together, and enhancing large-scale modeling to better represent vulnerable populations and extreme events.

DISCUSSION

In the open discussion, one participant asked the panelists for insights on whether a national socioeconomic and climate scenario development process could serve as a boundary object for transdisciplinary collaboration. Mach responded affirmatively, suggesting that scenarios can be boundary objects to identify weaknesses in existing institutions and regulations

related to climate. She said that they provide a proactive approach for creating positive futures by exploring diverse scenarios. Similarly, O’Neill said socioeconomic-climate scenarios could be boundary objects for transdisciplinary collaboration and offered two possible ways it could happen. First, he said that the scenario process itself can be valuable, irrespective of its specific products. Second, he said the process can aim to produce a set of national scenarios for the broader research community to use. He said that both methods can be pursued but that they have different implications for outcomes and organizational approaches. Last, Smith acknowledged the potential usefulness of such a scenario development process. He highlighted the importance of collaboration between climate scientists and economists and how such an exercise could help assess and refine economic models.

The panelists also reflected on lessons and insights from their interdisciplinary research experiences. Smith emphasized the importance of effective communication and trust-building across disciplines, acknowledging the time required to establish common ground for collaboration. Mach noted the benefit of rigorous evaluation, particularly in co-produced or community-based research, emphasizing the need for understanding whether the collaborative processes are benefiting all stakeholders. She highlighted the necessity of establishing a theory of change and monitoring outcomes toward longer-term impacts, involving all knowledge holders and participants. Richardson stressed the importance of theories of transformation that transcend individual theories of change, recognizing the value of diverse theories in addressing complex issues. She suggested adopting flexible, context-sensitive concepts.

When prompted for examples on how they would allocate $100 million in research funds, the panelists discussed investing in modeling and assessment and data and skills development. Specifically, Smith and Richardson suggested investing in human resources and talent for modeling, particularly in coding, algorithms, complex and dynamic economic modeling, and Earth system modeling. Smith also suggested allocating funds for acquiring more data on impacts at fine spatial resolution. Richardson expressed a need to better understand systemic responses and solution pathways. O’Neill suggested integrated assessment modeling, particularly larger-scale integrative multisector frameworks. He emphasized the need to model simultaneous impacts affecting society, going beyond sector-specific studies. Similarly, Rossi-Hansberg emphasized the importance of collaborations to develop a large model addressing basic economic impacts, recognizing the importance of coordinated research teams, schools, and institutes. Mach and Richardson highlighted the importance of systemic and transdisciplinary approaches, with Mach acknowledging specifically both basic research and systemic approaches. Last, Richardson underscored the importance of effective communication with decision makers.