CRED: A New Model of Climate and Development

This research paper introduces the Climate and Regional Economics of Development (CRED) model, an integrated assessment model (IAM) designed to analyze the intersection of climate mitigation and international economic development. The model's primary innovations include a focus on global equity through a concave utility function and the use of McKinsey marginal abatement cost curves to project mitigation costs. The authors argue that achieving climate stabilization requires either a very low discount rate or significant capital transfers from high-income to developing nations.

• The CRED model's unconstrained optimal scenario suggests that global utility is maximized through massive resource transfers from high-income to developing regions, which allows for rapid income equalization and climate stabilization (keeping temperature increases under 2°C and CO2 concentrations under 400 ppm CO2e).
• Climate stabilization is dependent on either a low discount rate or significant investment flows from wealthy to poor nations; without these, high discount rates in developing countries lead to a failure to control climate change.
• The model utilizes McKinsey marginal abatement cost curves for nine regions, fitting a two-parameter equation to the positive-cost portion of the data to estimate the technical potential for abatement (B).
• CRED differs from other IAMs by rejecting 'Negishi weights,' which typically suppress information about inequality to maintain existing income distributions, thereby highlighting the welfare-maximizing necessity of large interregional capital flows.
• The model assumes a productivity ratio of 0.5 for 'green' capital compared to standard capital, meaning mitigation investment is half as productive of income as standard investment.
• The authors adopted a higher climate sensitivity of 4.5°C for a doubling of atmospheric CO2 concentrations, reflecting concerns that the previously standard value of 3.0°C may be too low.

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} }