The Forecasting Performance of Energy-Economic Models

The predictive performance of economic-energy models has a direct bearing on their usefulness in the climate policy debate. One of the salient aspects of that debate is that some opponents of action to reduce GHG emissions are willing to make confident assertions about what the “cost to the economy” of various policy proposals (such as compliance with the Kyoto Protocol) would be. Yet at the same time these skeptics doubt the validity of the science that underlies forecasts of global warming, and claim that the observed century-long trend of increasing temperatures is indistinguishable from the “noise” of natural variation. They are willing to base strong policy recommendations on the forecasts of economic/energy models that purport to predict output, employment, prices, and emissions decades into the future, while denying the predictive power of physical science models of climate dynamics.