GHG Targets as Insurance Against Catastrophic Climate Damages

28 Pages Posted: 29 Jun 2010 Last revised: 6 Aug 2010

See all articles by Martin Weitzman

Martin Weitzman

Harvard University - Department of Economics

Date Written: June 2010

Abstract

A critical issue in climate-change economics is the specification of the so-called "damages function" and its interaction with the unknown uncertainty of catastrophic outcomes. This paper asks how much we might be misled by our economic assessment of climate change when we employ a conventional quadratic damages function and/or a thin-tailed probability distribution for extreme temperatures. The paper gives some numerical examples of the indirect value of various GHG concentration targets as insurance against catastrophic climate-change temperatures and damages. These numerical examples suggest that we might be underestimating considerably the welfare losses from uncertainty by using a quadratic damages function and/or a thin-tailed temperature distribution. In these examples, the primary reason for keeping GHG levels down is to insure against high-temperature catastrophic climate risks.

Suggested Citation

Weitzman, Martin L., GHG Targets as Insurance Against Catastrophic Climate Damages (June 2010). NBER Working Paper No. w16136. Available at SSRN: https://ssrn.com/abstract=1630141

Martin L. Weitzman (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-5133 (Phone)

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