A Multi-actor Model of Induced Technological Change and Economic Growth 1 A Multi-Actor Dynamic Integrated Assessment Model (MADIAM) of Induced Technological Change and Sustainable Economic Growth Michael Weber a , Volker Barth b , Klaus Hasselmann a,c a Max-Planck-Institute for Meteorology, Bundesstr. 53, 20146 Hamburg, Germany b GELENA Research Group, Carl-von-Ossietzky University, Postfach 2503, 26111 Oldenburg, Germany c European Climate Forum (http://www.european-climate-forum.net) Correspondence address: Michael Weber, Max-Planck-Institute for Meteorology, Bundesstr. 53, 20146 Hamburg, Germany, Email: michael.weber@dkrz.de Abstract: Interactions between climate and the socioeconomic system are investigated with a Multi-Actor Dynamic Integrated Assessement Model (MADIAM) obtained by coupling a non- linear impulse response model of the climate sub-system (NICCS) to a multi-actor dynamic economic model (MADEM). The core of MADEM describes an economy driven by the oppos- ing forces of business, striving to increase profits by investments in human and physical capital, and the erosion of profits through business competition, enhanced by labour wage pressure. The principal driver of economic growth is the increase in labour productivity (or human capital) generated by endogeneous technological change. In the presence of climate change, these ba- sic interactions are modified by government taxes on CO 2 emissions, which are recycled into the economy as various subsidies, by climate-related changes in consumer preferences, and by modified business investment decisions in response to these actions. The combined effect of the climate-response strategies of the different actors determine the form of the induced technolog- ical change that ultimately governs the evolution of the coupled climate-socioeconomic system. To clarify the individual roles of the actors, the model is set up in a systems-analytical way, with prescribed control algorithms for the different actors, rather than in the traditional single-actor cost/benefit optimization mode. In the reference ’moderate mitigation’ scenario, business investments in energy and carbon efficiency, induced by government CO 2 taxes, yield the largest contribution to emissions re- duction. Direct government mitigation actions through carbon taxes are more effective with regard to both emission reductions and economic growth if a significant fraction of carbon taxes are recycled into investments in energy and carbon efficiency, i.e. into induced technological change. The influence of consumer preferences, often neglected in integrated assessment anal- yses, can also be effective in guiding business investments. The chosen examples are intended as illustrations rather than to provide quantitative predictions. Keywords: dynamic integrated assessment, induced technological change, socioeconomic modelling, climate change, multi-actor scenarios