Climate Change Skepticism in the Face of Catastrophe
Tinbergen Institute Discussion Paper 12-112/VIII
36 Pages Posted: 26 Oct 2012 Last revised: 7 Nov 2014
Date Written: November 6, 2014
Despite overwhelming scientific evidence for man-made climate change, many people remain skeptical. While this phenomenon of `climate-skepticism' prevents implementation of environmental policies around the globe, it is ignored in economic models of climate change. In this paper I fill this gap by modeling policymakers with varying levels of skepticism facing a climate change catastrophe. I calculate optimal emission and consumption paths for various levels of belief in man-made climate change to explore the true cost of climate skepticism. My findings are as follows. First of all, I find that when facing catastrophic climate change even a completely skeptical policymaker (believing there is zero probability that climate change is connected to CO2 emissions) will not choose a path leading to unbounded climate change and emissions. Second, I find significant losses due to climate change resulting from skepticism if emission-driven climate change is real. Lastly, I find that moderate levels of skepticism will still allow for significant cuts in greenhouse gas emissions.
Keywords: climate change, uncertainty, skepticism, catastrophic damages, hazard
JEL Classification: Q54, Q58
Suggested Citation: Suggested Citation