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DICE-RD: An Implementation of Rate-Related Damages in the DICE model

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A growing body of literature from the natural and the social sciences indicates that the rate of temperature increase is another key driver of total climate damages, next to the absolute increase in temperature compared to the pre-industrial level. Nonetheless, the damage functions employed in integrated assessment models that aim at studying the economics of climate change are usually based on the absolute temperature increase alone. Hence, these models neglect additional damag-es that will occur if the rate of temperature increase exceeds a certain threshold that overstrains the adaptive capacities of ecological and social systems. In the present paper, we implement such rate-related damages in the well-known integrated assessment model DICE-2016R. Using the resulting model variant DICE-RD we show for several different scenarios that an insufficient climate policy that ignores rate-related damages can lead to substantial economic losses.

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  • Peter Michaelis & Heiko Wirths, 2019. "DICE-RD: An Implementation of Rate-Related Damages in the DICE model," Discussion Paper Series 337, Universitaet Augsburg, Institute for Economics.
    • Handle: RePEc:aug:augsbe:0337
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    1. 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.
    2. Justice Tambo & Tahirou Abdoulaye, 2012. "Climate change and agricultural technology adoption: the case of drought tolerant maize in rural Nigeria," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 17(3), pages 277-292, March.
    3. William Nordhaus, 2018. "Projections and Uncertainties about Climate Change in an Era of Minimal Climate Policies," American Economic Journal: Economic Policy, American Economic Association, vol. 10(3), pages 333-360, August.
    4. Scott R. Loarie & Philip B. Duffy & Healy Hamilton & Gregory P. Asner & Christopher B. Field & David D. Ackerly, 2009. "The velocity of climate change," Nature, Nature, vol. 462(7276), pages 1052-1055, December.
    5. 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.
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    More about this item

    Keywords

    integrated assessment; DICE model; climate policy; rate of temperature increase;
    All these keywords.

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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