SDM_GreenBondGDP

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WHAT IS IT?

This System Dynamic Model serves as an analytical instrument to observe the time-based dependence and interdependencies between economic development and eco pollution, as well as sustainable funding practices. Our model analyses three components: the use of Gross Domestic Product (GDP) as a measure of economic activity and pollution as a measure of environmental destruction, as well as green bonds staged for the cause of destroying toxins in pollution reduction projects (Gevorkyan et.al., 2016). The simulation looks at mutual relationships between these three elements as economic growth can cause environmental pollution, which can be mitigated by the use of green bonds. The model works as a simplified model of the real world that describes how possible conflicts between economic performance and environmental health come up and how that problem can be solved with green bonds – which is the policy instrument we’re using for this assignment.

HOW IT WORKS

The model monitors three stocks —GDP, pollution, and green bonds— connected through flows and variables. Each parameter changes due to its correlation with the other and stabilises after reaching sustainability. We have included sliders for growth rate, pollution rate, subsidy, efficiency and issuance of green bonds to make the model explorative with varying conditions.

Feedback loop: GDP starts at an intermediate growth rate and continues to grow as time goes on. This increases pollution, which in turn boosts issuance of green bonds. This can potentially stabilize the system as green bonds reduce pollution. Therefore, the impact of pollution on GDP is mitigated because of green bonds which indirectly support GDP, We have also introduced capacity terms for all stocks which act as nonlinear constraints (Meadows et al., 1972) to prevent collapse or runaway growth.

HOW TO USE IT

Execute - Initialize by hitting “Setup” and simulate by hitting “Go”.

Live—Monitor live values for GDP, pollution and green bonds in the Monitors.

In Plot 1, one can see all three, such as pollution and green bonds.

Plot 2 showcases the effects of Green bonds on Pollution, and Plot 3 depicts the relation between GDP and Pollution.

Sliders - Adjust growth rates, pollution intensity, green bond efficiency, or subsidies and see how they change using the sliders to explore different scenarios.

THINGS TO NOTICE

GDP skyrockets when pollution increases; however, as pollution grows, it slows GDP growth.

Effective green bonds can curb pollution, thereby supporting steadier economic growth. GDP and pollution stop growing as they reach their upper bounds, setting the limits of the system’s behaviour.

THINGS TO TRY

Increase the GDP growth to explore the effects of green bonds and pollution simultaneously.

Make Green Bonds super efficient in cutting pollution. Would that then allow the economy to grow larger without being strangled by its smog? Technically, it was a run where they were weak.

Drop Subsidies to Zero: End all subsidies with zero, as a government would end their support. Green bonds suffer from enough growth to matter, or does pollution win?

Raise pollution to see its impact on the economy. Then, try to tame green bond settings to see if any of that can be reduced.

Try all the sliders to see what sets GDP growing steadily and pollution decreasing or staying low.

This model stabilizes after running for a few ticks which demonstrate that as pollution decreases, and issuance of green bonds becomes less urgent, the GDP also stabilizes.

EXTENDING THE MODEL

The Model can be extended by adding several scenarios to check the effect on economic activity and pollution and compare and contrast Green-tech vs polluting industries. Pollution taxes can be added, which will also affect GDP and pollution. Random shocks can also be incorporated to test the resilience of the variables and gain a variety of insights.

NETLOGO FEATURES

This model utilises NetLogo's system dynamics modeler. This feature allows users to graphically construct stock-and-flow diagrams and automatically convert them into equations such as those for GDP growth or pollution decrease. This facility makes it easier to model sophisticated systems without extensive programming. It is also remarkable that multiple plots are used to view GDP, pollution, and green bonds in various scales at once, which facilitates comprehension of how they interact with each other. The Code tab is lean, counting on "system-dynamics-setup" and "system-dynamics-go" to manage the simulation, with "system-dynamics-do-plot" redrawing all plots every tick—showing how NetLogo combines system dynamics with real-time graphics with economical use of code.

CREDITS AND REFERENCES

Gevorkyan, A., Flaherty, M., Heine, D., Mazzucato, M., Radpour, S., & Semmler, W. (2016). Financing Climate Policies through Carbon Taxation and Climate Bonds – Theory and Empirics.

Meadows, D. H., Meadows, D. L., Randers, J., & Behrens III, W. W. (1972). The Limits to Growth. Universe Books.

Wilensky, U. (1999). NetLogo. http://ccl.northwestern.edu/netlogo/. Center for Connected Learning and Computer-Based Modeling, Northwestern University, Evanston, IL.

There is only one version of this model, created 15 days ago by Simran Kaur.

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