Uncertain outcomes and climate change policy
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Pindyck_Uncertain outcomes.pdf
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284.59 KB
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Author(s)
Pindyck, Robert S.
Date Issued
January 2012
Journal
Journal of Environmental Economics and Management
Publisher
Elsevier
Citation
Pindyck, Robert S. “Uncertain Outcomes and Climate Change Policy.” Journal of Environmental Economics and Management 63, no. 3 (May 2012): 289–303.
Version
Author's final manuscript
Abstract
I incorporate distributions for temperature change and its economic impact in an analysis of climate change policy. As a measure of willingness to pay (WTP), I estimate the fraction of consumption w[superscript ⁎](τ) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to ττ. Using information on distributions for temperature change and economic impact from recent studies assembled by the IPCC and others, I fit displaced gamma distributions for these variables. These fitted distributions, which roughly reflect the “state of knowledge” regarding warming and its impact, generally yield values of w[superscript ⁎](τ) below 2%, even for small values of ττ, consistent with moderate abatement policies. I also calculate WTP for shifts in the mean and standard deviation of the temperature distribution, and show how WTP, and thus the demand for abatement, are driven more by outcome uncertainty than expected outcomes.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1016/j.jeem.2011.12.001
