Uncertain Outcomes and Climate Change Policy
Name
2009-007.pdf
Size
316.02 KB
Format
Adobe PDF
Checksum (MD5)
caaaa9de1c25b91e29cf0fbdf03be5ec
Author(s)
Pindyck, Robert S.
Date Issued
August 2009
Publisher
MIT Center for Energy and Environmental Policy Research
Series/Report no.
MIT-CEEPR;09-007
Abstract
Focusing on tail effects, I incorporate distributions for temperature change and its economic impact in an analysis of climate change policy. I estimate the fraction of consumption w_(_ ) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to _ . Using information on the distributions for temperature change and economic impact from studies assembled by the IPCC and from “integrated assessment models” (IAMs), I fit displaced gamma distributions for these variables. Unlike existing IAMs, I model economic impact as a relationship between temperature change and the growth rate of GDP as opposed to its level, so that warming has a permanent impact on future GDP. The fitted distributions for temperature change and economic impact generally yield values of w_(_ ) below 2%, even for small values of _ , unless one assumes extreme parameter values and/or substantial shifts in the temperature distribution. These results are consistent with moderate abatement policies.
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