Assessing environmental policies through a stock-flow consistent lens

Principal investigator

• Yannis Dafermos (SOAS University of London)

Co-investigators

• Adam George (SOAS University of London)
• Maria Nikolaidi (University of Greenwich)

Funder

• Open Society Foundations 

Duration

• 2025-2027

The purpose of this project is to support the work of the Green Macroeconomic Modelling Initiative (GMMI) by incorporating the Dynamic Ecosystem-FINance-Economy (DEFINE) modelling framework into the analyses conducted by GMMI. 

GMMI is a community platform aiming to accelerate progress in assessing green economic transitions and to ensure up-to-date, fit-for-purpose analytical methods and data are used when providing quantitative assessments and advice to governments. The GMMI brings together leading economic analysis teams from around the world to evaluate specific economic policies and issues, test new approaches, compare results, and rapidly mainstream the most viable approaches for real-world policy contexts. It is a forum for leading practitioners to learn from one another and build collaborations needed to support policymaking around green economic transitions.

DEFINE is an ecological stock-flow consistent framework that studies environmental policies through the lens of the dynamic interactions between monetary and physical stocks and flows. The modelling framework captures instability, cycles and path dependencies that can arise from the interactions between macrofinancial systems and ecosystems. It explicitly depicts how environmental policies can affect debt accumulation, lead to financial fragility and create macrofinancial feedback loops. 

In terms of environmental issues, DEFINE incorporates the impact of carbon emissions on climate change, the economic implications of climate damages, the waste generation process, land conversion and water use. The modelling of physical stocks and flows takes into account the Law of Conservation of Mass, the 1st and the 2nd Law of Thermodynamics and the broader implications of living in a finite planet.

As part of this project, DEFINE-GLOBAL and country-specific DEFINE models is used to run environmental policy scenarios and make comparisons with the outputs of other GMMI models. DEFINE is also be used to illuminate the central role of finance in the evaluation of environmental policies. 

Header image credit: Geranimo via Unsplash.