Uncertain Outcomes and Climate Change Policy
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*(τ) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limite...
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| Format: | Working Paper |
| Language: | en_US |
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Cambridge, MA; Alfred P. Sloan School of Management, Massachusetts Institute of Technology
2011
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| Online Access: | http://hdl.handle.net/1721.1/66946 |
| _version_ | 1826202899199295488 |
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| author | Pindyck, Robert S. |
| author_facet | Pindyck, Robert S. |
| author_sort | Pindyck, Robert S. |
| collection | MIT |
| description | 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*(τ) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to τ. 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*(τ) below 2%, even for small values of τ, unless one assumes extreme parameter values and/or substantial shifts in the temperature distribution. These results are consistent with moderate abatement policies. |
| first_indexed | 2024-09-23T12:25:18Z |
| format | Working Paper |
| id | mit-1721.1/66946 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T12:25:18Z |
| publishDate | 2011 |
| publisher | Cambridge, MA; Alfred P. Sloan School of Management, Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/669462019-04-10T07:58:10Z Uncertain Outcomes and Climate Change Policy Pindyck, Robert S. catastrophic outcomes global warming climate change Environmental policy 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*(τ) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to τ. 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*(τ) below 2%, even for small values of τ, unless one assumes extreme parameter values and/or substantial shifts in the temperature distribution. These results are consistent with moderate abatement policies. 2011-11-04T19:57:04Z 2011-11-04T19:57:04Z 2009-08 Working Paper http://hdl.handle.net/1721.1/66946 en_US MIT Sloan School of Management Working Paper;4742-09 application/pdf Cambridge, MA; Alfred P. Sloan School of Management, Massachusetts Institute of Technology |
| spellingShingle | catastrophic outcomes global warming climate change Environmental policy Pindyck, Robert S. Uncertain Outcomes and Climate Change Policy |
| title | Uncertain Outcomes and Climate Change Policy |
| title_full | Uncertain Outcomes and Climate Change Policy |
| title_fullStr | Uncertain Outcomes and Climate Change Policy |
| title_full_unstemmed | Uncertain Outcomes and Climate Change Policy |
| title_short | Uncertain Outcomes and Climate Change Policy |
| title_sort | uncertain outcomes and climate change policy |
| topic | catastrophic outcomes global warming climate change Environmental policy |
| url | http://hdl.handle.net/1721.1/66946 |
| work_keys_str_mv | AT pindyckroberts uncertainoutcomesandclimatechangepolicy |