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How sensitive is Nordhaus to Weitzman? Climate policy in DICE with an alternative damage function

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  • Wouter Botzen, W.J.
  • van den Bergh, Jeroen C.J.M.

Abstract

The damage function in the famous climate-economy model DICE has received much criticism. Weitzman (2010) has proposed an alternative approach that gives more serious attention to climate change impacts for larger temperature increases. We calculate optimal climate policy with DICE using this approach. Optimal emission abatement trajectories turn out to be very sensitive to the damage specification. We summarise the difference between the associated optimal abatement costs in NPV terms.

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File URL: http://www.sciencedirect.com/science/article/pii/S016517651200300X
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 1 ()
Pages: 372-374

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:1:p:372-374

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Climate change; DICE model; Stern discounting;

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References

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  1. Simon Dietz & Geir B. Asheim, 2011. "Climate policy under sustainable discounted utilitarianism," LSE Research Online Documents on Economics 37578, London School of Economics and Political Science, LSE Library.
  2. Weitzman, Martin L., 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," Scholarly Articles 3693423, Harvard University Department of Economics.
  3. William D. Nordhaus, 1976. "Economic Growth and Climate: The Carbon Dioxide Problem," Cowles Foundation Discussion Papers 435, Cowles Foundation for Research in Economics, Yale University.
  4. Martin L. Weitzman, 2012. "GHG Targets as Insurance Against Catastrophic Climate Damages," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(2), pages 221-244, 03.
  5. Ackerman, Frank & Stanton, Elizabeth A. & Bueno, Ramón, 2010. "Fat tails, exponents, extreme uncertainty: Simulating catastrophe in DICE," Ecological Economics, Elsevier, vol. 69(8), pages 1657-1665, June.
  6. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-37, July.
  7. Pizer, William A., 1999. "The optimal choice of climate change policy in the presence of uncertainty," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 255-287, August.
  8. Popp, David, 2004. "ENTICE: endogenous technological change in the DICE model of global warming," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 742-768, July.
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