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

Author

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

Abstract

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.

Suggested Citation

  • Wouter Botzen, W.J. & van den Bergh, Jeroen C.J.M., 2012. "How sensitive is Nordhaus to Weitzman? Climate policy in DICE with an alternative damage function," Economics Letters, Elsevier, vol. 117(1), pages 372-374.
  • Handle: RePEc:eee:ecolet:v:117:y:2012:i:1:p:372-374
    DOI: 10.1016/j.econlet.2012.05.032
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    References listed on IDEAS

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    1. Martin L. Weitzman, 2012. "GHG Targets as Insurance Against Catastrophic Climate Damages," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(2), pages 221-244, March.
    2. 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 920-937, July.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. Nordhaus, William D, 1977. "Economic Growth and Climate: The Carbon Dioxide Problem," American Economic Review, American Economic Association, vol. 67(1), pages 341-346, February.
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    Citations

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    Cited by:

    1. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    2. Stephan Lewandowsky & James Risbey & Michael Smithson & Ben Newell & John Hunter, 2014. "Scientific uncertainty and climate change: Part I. Uncertainty and unabated emissions," Climatic Change, Springer, vol. 124(1), pages 21-37, May.
    3. Havranek, Tomas & Irsova, Zuzana & Janda, Karel & Zilberman, David, 2015. "Selective reporting and the social cost of carbon," Energy Economics, Elsevier, vol. 51(C), pages 394-406.
    4. Richard S. J. Tol, 2015. "Economic impacts of climate change," Working Paper Series 7515, Department of Economics, University of Sussex.
    5. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    6. W. Botzen & Jeroen Bergh, 2014. "Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 1-33, May.
    7. Christoph Hambel & Holger Kraft & Eduardo Schwartz, 2015. "Optimal Carbon Abatement in a Stochastic Equilibrium Model with Climate Change," NBER Working Papers 21044, National Bureau of Economic Research, Inc.
    8. repec:wsi:ccexxx:v:08:y:2017:i:02:n:s2010007817500063 is not listed on IDEAS
    9. Hambel, Christoph & Kraft, Holger & Schwartz, Eduardo S., 2015. "Optimal carbon abatement in a stochastic equilibrium model with climate change," SAFE Working Paper Series 92, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    10. KEVIN DAYARATNA & ROSS McKITRICK & DAVID KREUTZER, 2017. "Empirically Constrained Climate Sensitivity And The Social Cost Of Carbon," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-12, May.

    More about this item

    Keywords

    Climate change; DICE model; Stern discounting;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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