DSICE: A Dynamic Stochastic Integrated Model of Climate and Economy

34 Pages Posted: 27 Jan 2012

See all articles by Yongyang Cai

Yongyang Cai

Ohio State University (OSU); Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Kenneth L. Judd

Stanford University - The Hoover Institution on War, Revolution and Peace; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP); National Bureau of Economic Research (NBER)

Thomas S. Lontzek

University of Zurich; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Date Written: January 18, 2012

Abstract

This paper introduces a dynamic stochastic integrated model of climate and economy (DSICE), and a numerical dynamic programming algorithm for its solution. More specifically, we solve an example with annual time periods, a six hundred year horizon, and shocks to the economic and climate system. Our dynamic programming methods solve such models on a laptop in about an hour, and do so with good accuracy. This decisively refutes the pessimism one often hears about the possibility of solving such models.

Keywords: numerical dynamic programming, value function iteration, tipping points, stochastic IAM

JEL Classification: C63, Q54, D81

Suggested Citation

Cai, Yongyang and Judd, Kenneth L. and Lontzek, Thomas S., DSICE: A Dynamic Stochastic Integrated Model of Climate and Economy (January 18, 2012). RDCEP Working Paper No. 12-02, Available at SSRN: https://ssrn.com/abstract=1992674 or http://dx.doi.org/10.2139/ssrn.1992674

Yongyang Cai (Contact Author)

Ohio State University (OSU) ( email )

Department of Agricultural, Environmental
and Development Economics
Columbus, OH 43210
United States

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

Kenneth L. Judd

Stanford University - The Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Thomas S. Lontzek

University of Zurich ( email )

Switzerland

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
791
Abstract Views
3,508
Rank
57,999
PlumX Metrics