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Journal of Economic Literature: Vol. 51 No. 3 (September 2013)

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Climate Change Policy: What Do the Models Tell Us?

Article Citation

Pindyck, Robert S. 2013. "Climate Change Policy: What Do the Models Tell Us?" Journal of Economic Literature, 51(3): 860-72.

DOI: 10.1257/jel.51.3.860

Abstract

Very little. A plethora of integrated assessment models (IAMs) have been constructed and used to estimate the social cost of carbon (SCC) and evaluate alternative abatement policies. These models have crucial flaws that make them close to useless as tools for policy analysis: certain inputs (e.g., the discount rate) are arbitrary, but have huge effects on the SCC estimates the models produce; the models' descriptions of the impact of climate change are completely ad hoc, with no theoretical or empirical foundation; and the models can tell us nothing about the most important driver of the SCC, the possibility of a catastrophic climate outcome. IAM-based analyses of climate policy create a perception of knowledge and precision, but that perception is illusory and misleading.

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Authors

Pindyck, Robert S. (MIT)

JEL Classifications

C51: Model Construction and Estimation
Q54: Climate; Natural Disasters; Global Warming
Q58: Environmental Economics: Government Policy


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