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

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

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Dietz, Simon & Asheim, Geir B., 2012. "Climate policy under sustainable discounted utilitarianism," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 321-335.
  2. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
  3. 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.
  4. Martin L. Weitzman, 2010. "GHG Targets as Insurance Against Catastrophic Climate Damages," NBER Working Papers 16136, National Bureau of Economic Research, Inc.
  5. Nordhaus, William D, 1977. "Economic Growth and Climate: The Carbon Dioxide Problem," American Economic Review, American Economic Association, vol. 67(1), pages 341-46, February.
  6. 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.
  7. 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.
  8. 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.
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