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Moving targets—cost-effective climate policy under scientific uncertainty

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  • Reyer Gerlagh
  • Thomas Michielsen

Abstract

The IPCC’s fifth assessment report of Working Group III has just come out. It pays special attention to the 2 °C temperature target and tells us that the window of opportunity to prevent such climate change is rapidly closing. Yet, the report also presents a portfolio of stabilization targets, reflecting a fundamental ambiguity: there is no unique “dangerous” climate threshold. Here, we describe a framework for the evaluation of optimal climate policy given an uncertain formal climate threshold. We find that uncertainty leads to moving targets: even when the available information does not change, future regulators will tend to relax current climate plans. We develop a reduced form integrated assessment model to assess the quantitative significance of our findings. We calibrate preferences such that in 2000 a stabilization target of 450 ppmv maintains the optimal balance between climate risks and abatement costs. The naïve equilibrium ultimately reaches a peak of 570 ppmv, missing the 2000 stabilizations targets by a wide margin. Our results offer an explanation for the inertia in mitigation efforts over the past decades: policies often delay the majority of abatement efforts. Yet, believing that subsequent regulators will uphold the planned future efforts is self-defeating. Copyright Springer Science+Business Media Dordrecht 2015

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  • Reyer Gerlagh & Thomas Michielsen, 2015. "Moving targets—cost-effective climate policy under scientific uncertainty," Climatic Change, Springer, vol. 132(4), pages 519-529, October.
  • Handle: RePEc:spr:climat:v:132:y:2015:i:4:p:519-529
    DOI: 10.1007/s10584-015-1447-6
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    2. Gerlagh, Reyer, 2017. "Generous Sustainability," Ecological Economics, Elsevier, vol. 136(C), pages 94-100.
    3. Lucas Bretschger & Karen Pittel, 2020. "Twenty Key Challenges in Environmental and Resource Economics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(4), pages 725-750, December.
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    6. Reyer Gerlagh & Roweno J.R.K. Heijmans, 2018. "Regulating Stock Externalities," CESifo Working Paper Series 7383, CESifo.

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