Abstract

http://ssrn.com/abstract=1454991
 
 

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Uncertain Outcomes and Climate Change Policy


Robert S. Pindyck


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

August 2009

NBER Working Paper No. w15259

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*(tau) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to tau. 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*(tau) below 2%, even for small values of tau, unless one assumes extreme parameter values and/or substantial shifts in the temperature distribution. These results are consistent with moderate abatement policies.

Number of Pages in PDF File: 38

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Date posted: August 18, 2009  

Suggested Citation

Pindyck, Robert S., Uncertain Outcomes and Climate Change Policy (August 2009). NBER Working Paper No. w15259. Available at SSRN: http://ssrn.com/abstract=1454991

Contact Information

Robert S. Pindyck (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 Memorial Drive, E52-450
Cambridge, MA 02142
United States
617-253-6641 (Phone)
617-258-6855 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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