Uncertainty analysis of the cost of climate policies

Abstract

Every climate change policy issue is inherently limited by two questions: what are exactly the consequences of climate change for our lives? How much will it cost to deal with them? Almost twelve years after the parties of the United Nations Framework Convention on Climate Change met in Kyoto in 1992, acknowledging the fact that "change in the Earth's climate and its adverse effects are a common concern of humankind" (United Nations, 1992), no global effort is really visible yet. The reason lies in the difficulty scientists and economists have to answer those two questions. This thesis will try to understand how uncertainty on the consequences of climate change drives the cost of policy decisions. It will especially try to find out what are the main sources of uncertainty in policy costs and where should we therefore put our research and policy efforts. In the first part of this thesis, we will perform a sensitivity analysis on the economic parameters relevant to the analysis, in order to identify the ones that most influence the cost of climate change policies. We will then develop and run a specific method to elicit experts' opinions on the uncertainty on each on these parameters. This step will allow us to conduct our uncertainty analysis under different policy assumptions and to understand better the implications of uncertainty on climate change policies.