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Modeling the Impact of Warming in Climate Change Economics

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  • Robert S. Pindyck

Abstract

Any economic analysis of climate change policy requires some model that describes the impact of warming on future GDP and consumption. Most integrated assessment models (IAMs) relate temperature to the level of real GDP and consumption, but there are theoretical and empirical reasons to expect temperature to affect the growth rate rather than level of GDP. Does this distinction matter in terms of implications for policy? And how does the answer depend on the nature and extent of uncertainty over future temperature change and its impact? I address these questions by estimating the fraction of consumption society would be willing to sacrifice to limit future increases in temperature, using probability distributions for temperature and impact inferred from studies assembled by the IPCC, and comparing estimates based on a direct versus growth rate impact of temperature on GDP.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15692.

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Date of creation: Jan 2010
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Publication status: published as Robert S. Pindyck. "Modeling the Impact of Warming in Climate Change Economics," in Gary D. Libecap and Richard H. Steckel, editors, "The Economics of Climate Change: Adaptations Past and Present" University of Chicago Press (2011)
Handle: RePEc:nbr:nberwo:15692

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  1. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
  2. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change, Part II. Dynamic Estimates," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(2), pages 135-160, February.
  3. Weitzman, Martin L., 2009. "Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting," Economics Discussion Papers 2009-26, Kiel Institute for the World Economy.
  4. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2009. "Temperature and Income: Reconciling New Cross-Sectional and Panel Estimates," NBER Working Papers 14680, National Bureau of Economic Research, Inc.
  5. Robert N. Stavins, 2007. "Environmental Economics," NBER Working Papers 13574, National Bureau of Economic Research, Inc.
  6. Richard S. J. Tol, 2010. "The Economic Impact of Climate Change," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(s1), pages 13-37, 05.
  7. Robert S. Pindyck, 2009. "Uncertain Outcomes and Climate Change Policy," Working Papers 0907, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  8. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
  9. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
  10. Robert Mendelsohn, 2008. "Is the Stern Review an Economic Analysis?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 45-60, Winter.
  11. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2008. "Climate Change and Economic Growth: Evidence from the Last Half Century," NBER Working Papers 14132, National Bureau of Economic Research, Inc.
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Cited by:
  1. Rajnish Mehra, 2013. "Asset Pricing Implications of Macroeconomic Interventions An Application to Climate Policy," NBER Working Papers 19146, National Bureau of Economic Research, Inc.
  2. Robert S. Pindyck, 2010. "Fat Tails, Thin Tails, and Climate Change Policy," NBER Working Papers 16353, National Bureau of Economic Research, Inc.
  3. Gary D. Libecap, 2010. "Institutional Path Dependence in Climate Adaptation: Coman's “Some Unsettled Problems of Irrigation”," NBER Working Papers 16324, National Bureau of Economic Research, Inc.
  4. Prasenjit Banerjee & Jason F. Shogren, 2013. "Climate Change: Risk, Reputation, and Mechanism Design," The School of Economics Discussion Paper Series 1303, Economics, The University of Manchester.

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