CRED: A New Model of Climate and Development

The CRED model investigates how international equity and capital flows influence climate stabilization. It argues that an optimal, welfare-maximizing climate policy requires significant resource transfers from high-income to developing regions to fund abatement and economic growth. The model utilizes McKinsey marginal abatement cost curves and a concave utility function to demonstrate that without such transfers or a very low discount rate, developing countries are unlikely to implement sufficient mitigation to prevent dangerous temperature increases.

• The unconstrained optimal climate policy in the CRED model requires massive capital transfers from high-income to developing countries, which would lead to a rapid equalization of income and keep temperature increases below 2°C and atmospheric CO2 concentrations under 400 ppm CO2e.
• Climate stabilization is only achievable if there is either a very low discount rate (pure time preference) or significant transfers of investment funds from high-income to developing countries.
• In scenarios with no global pooling of investment and a high discount rate (1.5 percent), the model predicts a failure to control climate change, leading to runaway temperature and CO2 outcomes.
• The model's use of a concave utility function implies that marginal utility is significantly higher in poor regions; for example, in 2005, $1 consumed in South Asia yielded the same utility as $52 in the United States.
• CRED differs from other integrated assessment models by avoiding 'Negishi weights,' which typically suppress information about inequality to prevent large capital flows between regions.
• The model assumes that 'green' investment is half as productive of income as standard investment, reflecting the view that while mitigation creates jobs, it does not produce as much economic growth as standard capital.

APA

Ackerman, F., Stanton, E. A., & Bueno, R. (2010). CRED: A New Model of Climate and Development. Stockholm Environment Institute. https://www.sei.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/wp-us-1003-cred.pdf

Chicago

Ackerman, Frank, Elizabeth A. Stanton, and Ramón Bueno. CRED: A New Model of Climate and Development. Stockholm Environment Institute, 2010. https://www.sei.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/wp-us-1003-cred.pdf.

Wikipedia

{{cite report |last1=Ackerman |first1=Frank |last2=Stanton |first2=Elizabeth A. |last3=Bueno |first3=Ramón |title=CRED: A New Model of Climate and Development |publisher=Stockholm Environment Institute |date=28 April 2010 |url=https://www.sei.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/wp-us-1003-cred.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ackerman2010cred, author = {Ackerman, Frank and Stanton, Elizabeth A. and Bueno, Ramón}, title = {{CRED: A New Model of Climate and Development}}, institution = {Stockholm Environment Institute}, year = {2010}, month = apr, url = {https://www.sei.org/mediamanager/documents/Publications/Climate-mitigation-adaptation/wp-us-1003-cred.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }