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DICE-RD: an implementation of rate-related damages in the DICE model

Author

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  • Peter Michaelis

    (University of Augsburg)

  • Heiko Wirths

    (Amprion GmbH)

Abstract

A growing body of literature from the natural and the social sciences indicates that the rate of temperature increase is another key driver of total climate damages, next to the absolute increase in temperature compared to the pre-industrial level. Nonetheless, the damage functions employed in integrated assessment models that aim at studying the economics of climate change usually are based solely on the absolute temperature increase. Hence, these models neglect additional damages that will occur if the rate of temperature increase exceeds a certain threshold that overstrains the adaptive capacities of ecological and social systems. In the present paper, we implement such rate-related damages in the well-known integrated assessment model DICE-2016R. Using the resulting model variant DICE-RD, we show for several scenarios that an insufficient climate policy that ignores rate-related damages can lead to substantial economic losses.

Suggested Citation

  • Peter Michaelis & Heiko Wirths, 2020. "DICE-RD: an implementation of rate-related damages in the DICE model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(4), pages 555-584, October.
    • Handle: RePEc:spr:envpol:v:22:y:2020:i:4:d:10.1007_s10018-020-00269-4
    DOI: 10.1007/s10018-020-00269-4
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    Cited by:

    1. Rickels, Wilfried & Schwinger, Jörg, 2021. "Implications of temperature overshoot dynamics for climate and carbon dioxide removal policies in the DICE model," Open Access Publications from Kiel Institute for the World Economy 248716, Kiel Institute for the World Economy (IfW Kiel).
    2. Rogna, Marco & Vogt, Carla J., 2021. "Accounting for inequality aversion can justify the 2° C goal," Ruhr Economic Papers 925, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Wei Jin & Rick van der Ploeg & Lin Zhang, 2020. "Do We Still Need Carbon-Intensive Capital When Transitioning to a Green Economy?," CESifo Working Paper Series 8745, CESifo.
    4. Marco Rogna & Carla J. Vogt, 2022. "Optimal climate policies under fairness preferences," Climatic Change, Springer, vol. 174(3), pages 1-20, October.

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    More about this item

    Keywords

    Integrated assessment; DICE model; Climate policy; Rate of temperature increase;
    All these keywords.

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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