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Transient temperature response modeling in IAMs: the effects of over simplification on the SCC

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  • Marten, Alex L.

Abstract

Integrated Assessment Models (IAMs) couple representations of the natural climate system with models of the global economy to capture interactions that are important for the evaluation of potential climate and energy policies. The U.S. federal government currently uses such models to derive the benefits of carbon mitigation policies through estimates of the social cost of carbon (SCC). To remain tractable these models often utilize highly simplified representations of complex natural, social, and economic systems. This makes IAMs susceptible to oversimplification by failing to capture key features of the underlying system that are important for policy analysis. In this paper we focus on one area in which these models appear to have fallen into such a trap. We consider three prominent IAMs, DICE, FUND, and PAGE, and examine the way in which these models represent the transient temperature response to increases in radiative forcing. We compare the highly simplified temperature response models in these IAMs to two upwelling diffusion energy balance models that better reflect the progressive uptake of heat by the deep ocean. We find that all three IAMs are unable to fully capture important characteristics in the temporal dynamics of temperature response, especially in the case of high equilibrium climate sensitivity. This has serious implications given that these models are often run with distributions for the equilibrium climate sensitivity that contain a positive probability for such states of the world. We find that all else equal the temperature response function utilized in the FUND model results in estimates of the expected SCC that are up to 25% lower than those derived with the more realistic climate models, while the functions used in DICE and PAGE lead to expected SCC estimates up to 40% and 50% higher, respectively. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2011-11.

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Date of creation: 2011
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Handle: RePEc:zbw:ifwedp:201111

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Keywords: social cost of carbon; integrated assessment; transient temperature response;

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References

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  1. Pizer, William & Newell, Richard, 2000. "Discounting the Distant Future: How Much Do Uncertain Rates Increase Valuations?," Discussion Papers, Resources For the Future dp-00-45, Resources For the Future.
  2. Weitzman, Martin L., 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," Scholarly Articles 3693423, Harvard University Department of Economics.
  3. Martin L. Weitzman, 2010. "GHG Targets as Insurance Against Catastrophic Climate Damages," NBER Working Papers 16136, National Bureau of Economic Research, Inc.
  4. Nordhaus, William D., 2007. "Two Centuries of Productivity Growth in Computing," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 67(01), pages 128-159, March.
  5. Detlef Vuuren & Jason Lowe & Elke Stehfest & Laila Gohar & Andries Hof & Chris Hope & Rachel Warren & Malte Meinshausen & Gian-Kasper Plattner, 2011. "How well do integrated assessment models simulate climate change?," Climatic Change, Springer, Springer, vol. 104(2), pages 255-285, January.
  6. Daiju Narita & Richard Tol & David Anthoff, 2010. "Economic costs of extratropical storms under climate change: an application of FUND," Journal of Environmental Planning and Management, Taylor & Francis Journals, Taylor & Francis Journals, vol. 53(3), pages 371-384.
  7. Partha Dasgupta, 2008. "Discounting climate change," Journal of Risk and Uncertainty, Springer, Springer, vol. 37(2), pages 141-169, December.
  8. Plambeck, Erica L & Hope, Chris, 1996. "PAGE95 : An updated valuation of the impacts of global warming," Energy Policy, Elsevier, Elsevier, vol. 24(9), pages 783-793, September.
  9. Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
  10. Marten, Alex L. & Newbold, Stephen C., 2012. "Estimating the social cost of non-CO2 GHG emissions: Methane and nitrous oxide," Energy Policy, Elsevier, Elsevier, vol. 51(C), pages 957-972.
  11. Stephen Newbold & Adam Daigneault, 2009. "Climate Response Uncertainty and the Benefits of Greenhouse Gas Emissions Reductions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 44(3), pages 351-377, November.
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Cited by:
  1. Kögel, Tomas, 2011. "The social cost of carbon on an optimal balanced growth path," Economics Discussion Papers 2011-35, Kiel Institute for the World Economy.
  2. Richard S. J. Tol & In Chang Hwang & Frédéric Reynès, 2012. "The Effect of Learning on Climate Policy under Fat-tailed Uncertainty," Working Paper Series 5312, Department of Economics, University of Sussex.
  3. Richard S.J. Tol, 2012. "Targets for Global Climate Policy: An Overview," Working Paper Series 3712, Department of Economics, University of Sussex.
  4. In Hwang & Frédéric Reynès & Richard Tol, 2013. "Climate Policy Under Fat-Tailed Risk: An Application of Dice," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 56(3), pages 415-436, November.
  5. Kopp, Robert E. & Mignone, Bryan K., 2012. "The US government's social cost of carbon estimates after their first two years: Pathways for improvement," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(15), pages 1-41.

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