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Climate Change Policy: What Do the Models Tell Us?

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  • Robert S. Pindyck

Abstract

Very little. A plethora of integrated assessment models (IAMs) have been constructed and used to estimate the social cost of carbon (SCC) and evaluate alternative abatement policies. These models have crucial flaws that make them close to useless as tools for policy analysis: certain inputs (e.g., the discount rate) are arbitrary, but have huge effects on the SCC estimates the models produce; the models' descriptions of the impact of climate change are completely ad hoc, with no theoretical or empirical foundation; and the models can tell us nothing about the most important driver of the SCC, the possibility of a catastrophic climate outcome. IAM-based analyses of climate policy create a perception of knowledge and precision, but that perception is illusory and misleading.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.51.3.860
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 51 (2013)
Issue (Month): 3 (September)
Pages: 860-72

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Handle: RePEc:aea:jeclit:v:51:y:2013:i:3:p:860-72

Note: DOI: 10.1257/jel.51.3.860
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Citations

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Cited by:
  1. Nicholas Stern, 2013. "The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 838-59, September.
  2. Cass R. Sunstein, 2014. "On Not Revisiting Official Discount Rates: Institutional Inertia and the Social Cost of Carbon," American Economic Review, American Economic Association, vol. 104(5), pages 547-51, May.
  3. S. Scrieciu & Zaid Chalabi, 2014. "Climate policy planning and development impact assessment," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(3), pages 255-260, March.
  4. Fisher, Anthony C & Le, Phu V, 2014. "Reflections on Climate Policy:Science, Economics, and Extremes," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6tj3j4jb, Department of Agricultural & Resource Economics, UC Berkeley.
  5. David I. Stern & Frank Jotzo & Leo Dobes, 2013. "The Economics of Global Climate Change: A Historical Literature Review," CCEP Working Papers 1307, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  6. Devin Bunten & Matthew E. Kahn, 2014. "The Impact of Emerging Climate Risks on Urban Real Estate Price Dynamics," NBER Working Papers 20018, National Bureau of Economic Research, Inc.
  7. Moxnes, Erling, 2014. "Discounting, climate and sustainability," Ecological Economics, Elsevier, vol. 102(C), pages 158-166.
  8. Martin L. Weitzman, 2014. "Fat Tails and the Social Cost of Carbon," American Economic Review, American Economic Association, vol. 104(5), pages 544-46, May.
  9. Xepapadeas, Anastasios & Ralli, Parthenopi & Kougea, Eva & Spyrou, Sofia & Stavropoulos, Nikolaos & Tsiaousi, Vasiliki & Tsivelikas, Athanasios, 2014. "Valuing insurance services emerging from a gene bank: The case of the Greek Gene Bank," Ecological Economics, Elsevier, vol. 97(C), pages 140-149.
  10. Nicholas Stern, 2013. "EEthics, Equity and the Economics of Climate Change. Paper 1: Science and Philosophy," Grantham Research Institute on Climate Change and the Environment Working Papers 84a, Grantham Research Institute on Climate Change and the Environment.
  11. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2013. "What Do We Learn from the Weather? The New Climate-Economy Literature," NBER Working Papers 19578, National Bureau of Economic Research, Inc.
  12. Paul, Anthony & Beasley, Blair & Palmer, Karen, 2013. "Taxing Electricity Sector Carbon Emissions at Social Cost," Discussion Papers dp-13-23-rev, Resources For the Future.
  13. Gary D. Libecap, 2013. "Addressing Global Environmental Externalities: Transaction Costs Considerations," NBER Working Papers 19501, National Bureau of Economic Research, Inc.
  14. Winfield, Mark & Dolter, Brett, 2014. "Energy, economic and environmental discourses and their policy impact: The case of Ontario׳s Green Energy and Green Economy Act," Energy Policy, Elsevier, vol. 68(C), pages 423-435.
  15. Yingying Lu & David I. Stern, 2014. "Substitutability and the Cost of Climate Mitigation Policy," CAMA Working Papers 2014-28, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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