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The Use and Misuse of Models for Climate Policy

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  • Robert S. Pindyck

Abstract

In recent articles I have argued that integrated assessment models (IAMs) have flaws that make them close to useless as tools for policy analysis. IAM-based analyses of climate policy create a perception of knowledge and precision that is illusory and can fool policymakers into thinking that the forecasts the models generate have some kind of scientific legitimacy. However, some economists and climate scientists have claimed that we need to use some kind of model for policy analysis and that IAMs can be structured and used in ways that correct for their shortcomings. For example, it has been argued that although we know very little about key relationships in the model, we can get around this problem by attaching probability distributions to various parameters and then simulating the model using Monte Carlo methods. I argue that this would buy us nothing and that a simpler and more transparent approach to the design of climate change policy is preferable. I briefly outline what such an approach would look like.

Suggested Citation

  • Robert S. Pindyck, 2017. "The Use and Misuse of Models for Climate Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 100-114.
  • Handle: RePEc:oup:renvpo:v:11:y:2017:i:1:p:100-114.
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    1. 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.
    2. Robert S. Pindyck, 2011. "Modeling the Impact of Warming in Climate Change Economics," NBER Chapters, in: The Economics of Climate Change: Adaptations Past and Present, pages 47-71, National Bureau of Economic Research, Inc.
    3. Robert S. Pindyck, 2013. "Climate Change Policy: What Do the Models Tell Us?," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 860-872, September.
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    7. Pindyck, Robert S., 2012. "Uncertain outcomes and climate change policy," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 289-303.
    8. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801.
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    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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