Decision Making in the Face of Economic and Climate Uncertainty
Saturday, Jan. 7, 2017 7:30 PM – 9:30 PM
- Chair: Thomas Hertel, Purdue University
Robust Consumption and Energy Decisions
AbstractWe study a simple model of economic growth where society’s preferences are a function of consumption per capita and climate quality; and the specification of the climate dynamics is inspired by recent work in climate science. The model is estimated to establish a reference model and we develop a new method that determines the reasonable size of a set of surrounding models which are difficult to distinguish from the reference model. We show that robust agents who deny the effects of climate change on the economy, behave more like agents who believe climate changes are real. This happens because robust non-believers design policies that hedge against their worst case model which does include an anthropogenic effect of their emissions on climate and these changes in climate have negative effects on preferences and productivity.
Climate Change Economics and Heat Transport Across the Globe: Spatial-DSICE
AbstractThis paper extends the stochastic DSICE model of Cai et al. (Cai et al. 2015a, 2015b) to include the case of spatial transport of heat and moisture from the Equator to the Poles. This well-known and important phenomenon in climate science has been neglected in popular IAM’s, e.g. RICE and DICE (Nordhaus 2010, 2013). Spatial transport leads to another well-known phenomenon in climate science called polar amplification where a one degree increase in the global yearly mean temperature anomaly causes a more than one degree increase of the yearly mean temperature anomaly in the high latitudes (Langen and Alexeev 2007). This extension allows us to compare the optimal paths of key quantities like the Social Cost of Carbon (SCC), emissions, abatement, and damages and their uncertainty bands when heat and moisture transport are neglected as in the received literature on IAMs to when this important phenomenon documented by climate science is included. We view our paper as a first step towards adding additional aspects of climate dynamics like heat and moisture transport across latitudes and polar amplification to the existing literature on IAMs.
- Q0 - General