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Modeling the Impact of Warming in Climate Change Economics

In: The Economics of Climate Change: Adaptations Past and Present

  • Robert S. Pindyck

Any economic analysis of climate change policy requires some model that describes the impact of warming on future GDP and consumption. Most integrated assessment models (IAMs) relate temperature to the level of real GDP and consumption, but there are theoretical and empirical reasons to expect temperature to affect the growth rate rather than level of GDP. Does this distinction matter in terms of implications for policy? And how does the answer depend on the nature and extent of uncertainty over future temperature change and its impact? I address these questions by estimating the fraction of consumption society would be willing to sacrifice to limit future increases in temperature, using probability distributions for temperature and impact inferred from studies assembled by the IPCC, and comparing estimates based on a direct versus growth rate impact of temperature on GDP.

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This chapter was published in:
  • Gary D. Libecap & Richard H. Steckel, 2011. "The Economics of Climate Change: Adaptations Past and Present," NBER Books, National Bureau of Economic Research, Inc, number libe10-1, August.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11982.
    Handle: RePEc:nbr:nberch:11982
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2008. "Climate Change and Economic Growth: Evidence from the Last Half Century," NBER Working Papers 14132, National Bureau of Economic Research, Inc.
    2. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2009. "Temperature and Income: Reconciling New Cross-Sectional and Panel Estimates," American Economic Review, American Economic Association, vol. 99(2), pages 198-204, May.
    3. Pindyck, Robert S., 2012. "Uncertain outcomes and climate change policy," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 289-303.
    4. Tol, Richard S. J., 2008. "The Economic Impact of Climate Change," Papers WP255, Economic and Social Research Institute (ESRI).
    5. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change, Part II. Dynamic Estimates," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(2), pages 135-160, February.
    6. Weitzman, Martin L., 2009. "Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting," Scholarly Articles 9639963, Harvard University Department of Economics.
    7. Stavins, Robert, 2004. "Environmental Economics," Working Paper Series rwp04-051, Harvard University, John F. Kennedy School of Government.
    8. Robert Mendelsohn, 2008. "Is the Stern Review an Economic Analysis?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 45-60, Winter.
    9. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
    10. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
    11. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
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