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What is the Value of Scientific Knowledge? An Application to Global Warming Using the PRICE Model

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  • William D. Nordhaus
  • David Popp

Abstract

Governments must cope with the enormous uncertainties about both future climate change as well as the costs and benefits of slowing climate change. This study analyses the value of improved information about a variety of geophysical and economic processes. The value of information is estimated using the "PRICE model" which is a probabilistic extension of earlier models of the economics of global warming. The study uses five different approaches to estimating the value of information about all uncertain parameters and about individual parameters. It is estimated that the value of early information is between $1 and $2 billion for each year that resolution of uncertainty is moved toward the present. We estimate that the most important uncertain variables are the damages of climate change and the costs of reducing greenhouse gas emissions. Resolving the uncertainties about these two parameters would contribute 75 percent of the value of improved knowledge.

Suggested Citation

  • William D. Nordhaus & David Popp, 1997. "What is the Value of Scientific Knowledge? An Application to Global Warming Using the PRICE Model," The Energy Journal, , vol. 18(1), pages 1-45, January.
    • Handle: RePEc:sae:enejou:v:18:y:1997:i:1:p:1-45
    DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No1-1
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    References listed on IDEAS

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    1. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, December.
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    1. A. Hossain & A.-A. Masum & S. Saadi & R. Benkraiem & N. Das, 2023. "Firm-Level Climate Change Risk and CEO Equity Incentives," Post-Print hal-04434397, HAL.
    2. World Bank, 1998. "World Development Report 1998/1999," World Bank Publications - Books, The World Bank Group, number 5981, April.
    3. Jennifer Morris & Andrei Sokolov & John Reilly & Alex Libardoni & Chris Forest & Sergey Paltsev & C. Adam Schlosser & Ronald Prinn & Henry Jacoby, 2025. "Author Correction: Quantifying both socioeconomic and climate uncertainty in coupled human–Earth systems analysis," Nature Communications, Nature, vol. 16(1), pages 1-1, December.
    4. Jesús Fernández-Villaverde & Kenneth Gillingham & Simon Scheidegger, 2024. "Climate Change through the Lens of Macroeconomic Modeling," NBER Working Papers 32963, National Bureau of Economic Research, Inc.

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