Integrating economic analysis and the science of climate instability

Hall, Darwin C.; Behl, Richard J.

doi:10.1016/j.ecolecon.2005.05.001

Cited by 23 publications

(22 citation statements)

References 76 publications

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“…Other researchers have studied the effects of improvements in the DICE treatment of the carbon cycle (Joos et al 1999), and the impact of uncertain climate thresholds for small but irreversible losses (Keller et al 2004). A recent analysis argues that DICE and similar models cannot adequately reflect the risks of abrupt, catastrophic climate change (Hall and Behl 2006). (If it occurred today, the potential "catastrophe" modeled by Nordhaus and Boyer, a 30% loss of output, would amount to a return to the per capita income levels of the 1980s or 1990s for many countries.…”

Section: The Dice Modelmentioning

confidence: 99%

The economics of inaction on climate change: a sensitivity analysis

Ackerman

Finlayson

2006

Climate Policy

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Economic models of climate change often take the problem seriously, but paradoxically conclude that the optimal policy is to do almost nothing about it. We explore this paradox as seen in the widely used DICE model. Three aspects of that model, involving the discount rate, the assumed benefits of moderate warming, and the treatment of the latest climate science, are sufficient to explain the timidity of the model's optimal policy recommendation. With modifications to those three points, DICE shows that the optimal policy is a much higher and rapidly rising marginal carbon price; that higher carbon price has a greater effect on physical measures of climate impacts. Our modifications exhibit nonlinear interactions; at least at low discount rates, there is synergy between individual changes to the model. At low discount rates, the inherent uncertainty about future damages looms larger in the analysis, rendering long-run economic modeling less useful.Our analysis highlights the sensitivity of the model to three debatable assumptions; it does not, and could not, lead to a more reliably "optimal" cost of carbon. Cost-effectiveness analysis, focusing on the generally shorter-term cost side of the problem, reduces the economic paradoxes of the long run, and may make a greater contribution than economic optimization modeling.

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Section: The Dice Modelmentioning

confidence: 99%

The economics of inaction on climate change: a sensitivity analysis

Ackerman

Finlayson

2006

Climate Policy

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“…The first tipping point (a) makes temperature more sensitive to CO 2 emissions. It reflects the possibility that warming mobilizes large methane stores locked in permafrost and in shallow ocean clathrates [21][22][23][24] . It also reflects the possibility that land ice sheets begin to retreat on decadal timescales: the resulting loss of reflective ice could double the long-term warming predicted by models that hold land ice sheets fixed 3 .…”

Section: Tipping Points and Economic Modelmentioning

confidence: 99%

Economics of tipping the climate dominoes

2016

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Greenhouse gas emissions can trigger irreversible regime shifts in the climate system, known as tipping points. Multiple tipping points affect each other's probability of occurrence, potentially causing a "domino effect". We analyze climate policy in the presence of a potential domino effect. We incorporate three different tipping points occurring at unknown thresholds into an integrated climate-economy model. The optimal emission policy considers all possible thresholds and the resulting interactions between tipping points, economic activity, and policy responses into the indefinite future. We quantify the cost of delaying optimal emission controls in the presence of uncertain tipping points and also the benefit of detecting when individual tipping points have been triggered. We show that the presence of these tipping points nearly doubles today's optimal carbon tax and reduces peak warming along the optimal path by approximately 1 degree Celsius. The presence of these tipping points increases the cost of delaying optimal policy until mid-century by nearly 150%.The threat of climate tipping points plays a major role in calls for aggressive emission reductions to limit warming to 2 degrees Celsius 3-6 . The scientific literature is particularly concerned with the possibility of a "domino effect" from multiple interacting tipping points [7][8][9][10][11][12] . For instance, reducing the effectiveness of carbon sinks amplifies future warming, which in turn makes further tipping points more likely. Nearly all of the preceding quantitative economic studies analyze opti-

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“…Several economists working at the theoretical frontier have proposed new ways of dealing with these kinds of deep uncertainties (e.g., Gjerde et al 1999;Chichilnisky 2000;Hall and Behl 2006;Dasgupta 2008;Weitzman 2007aWeitzman , b, 2009). For example, Martin Weitzman has developed a model applicable to financial markets as well as climate change.…”

Section: Insurance Precaution and The Contribution Of Climate Economentioning

confidence: 99%

“…For example, the review article by Hall and Behl (2006) highlights the consequences of climate instability and rapid large-scale shifts in global climate for the economic analysis of climate change. Lenton et al (2008) identify and catalogue potential "tipping elements" in the climate system.…”

Section: Introductionmentioning

confidence: 99%

“…A recent MIT assessment of the congressional cap-and-trade proposals estimated net welfare losses ranging up to about 2% of GDP by 2050 ). 2 Examples of articles dealing with the kinds of issues treated by Hall and Behl (2006) include Kennedy et al (2008), Hoegh-Guldberg et al (2007), and Buffett and Archer (2004). represent climate costs and benefits. We identify three principal areas in which the standard economic approach is arguably deficient: the discounted utility framework, which attaches less weight to future outcomes; the characterization and monetization of the benefits of mitigation; and the projection of mitigation costs, which rests on assumptions about the pace and nature of technical change.…”

Section: Introductionmentioning

confidence: 99%

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Limitations of integrated assessment models of climate change

et al. 2009

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The integrated assessment models (IAMs) that economists use to analyze the expected costs and benefits of climate policies frequently suggest that the "optimal" policy is to go slowly and to do relatively little in the near term to reduce greenhouse gas emissions. We trace this finding to the contestable assumptions and limitations of IAMs. For example, they typically discount future impacts from climate change at relatively high rates. This practice may be appropriate for short-term financial decisions but its extension to intergenerational environmental issues rests on several empirically and philosophically controversial hypotheses. IAMs also assign monetary values to the benefits of climate mitigation on the basis of incomplete information and sometimes speculative judgments concerning the monetary worth

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Integrating economic analysis and the science of climate instability

Cited by 23 publications

References 76 publications

The economics of inaction on climate change: a sensitivity analysis

The economics of inaction on climate change: a sensitivity analysis

Economics of tipping the climate dominoes

Limitations of integrated assessment models of climate change

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