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Moving Forward with Incorporating "Catastrophic" Climate Change into Policy Analysis

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  • Elizabeth Kopits
  • Alex L. Marten
  • Ann Wolverton

Abstract

It has often been stated that current studies aimed at understanding the magnitude of optimal climate policy fail to adequately capture the potential for “catastrophic” impacts of climate change. While economic modeling exercises to date do provide evidence that potential climate catastrophes might significantly influence the optimal path of abatement, there is a need to move beyond experiments which are abstracted from important details of the climate problem in order to substantively inform the policy debate. This paper provides a foundation for improving the economic modeling of potential large scale impacts of climate change in order to understand their influence on estimates of socially efficient climate policy. We begin by considering how the term “catastrophic impacts” has been used in the scientific literature to describe changes in the climate system and carefully review the characteristics of the events that have been discussed in this context. We contrast those findings with a review of the way in which the economic literature has modeled the potential economic and human welfare impacts of events of this nature. We find that the uniform way in which the economic literature has typically modeled such impacts along with the failure to understand differences in the end points and timescales examined by the natural science literature has resulted in the modeling of events that do not resemble those of concern. Based on this finding and our review of the scientific literature we provide a path forward for better incorporating these events into integrated assessment modeling, identifying areas where modeling could be improved even within current modeling frameworks and others where additional work is needed.

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File URL: http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2013-01/$File/2013-01.PDF
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Bibliographic Info

Paper provided by National Center for Environmental Economics, U.S. Environmental Protection Agency in its series NCEE Working Paper Series with number 201301.

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Length: 81 pages
Date of creation: Jan 2013
Date of revision: Jan 2013
Handle: RePEc:nev:wpaper:wp201301

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Keywords: climate change; catastrophes; integrated assessment model;

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References

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Cited by:
  1. Frederick van der Ploeg, 2014. "Abrupt Positive Feedback and the Social Cost of Carbon," OxCarre Working Papers 122, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  2. 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.

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