Modeling Scientific Uncertainty in the Economic Evaluation of Climate Policy
WRI’s Climate & Energy Program is hosting a brownbag presentation by Derek Lemoine, Assistant Professor in the Department of Economics at the University of Arizona. Dr. Lemoine’s work focuses on environmental and energy economics, climate modeling, and decision making based on climate change. This brownbag will highlight the issue of uncertainty.
Climate policy must consider at least four sources of uncertainty:
uncertainty about temperature change
uncertainty about damages along a temperature path
uncertainty about the possibility of abrupt changes or tipping points
uncertainty about future low-carbon technology
The first part of this talk presents the speaker's research on uncertainty about temperature change. It demonstrates how the possibility of extreme climate outcomes (i.e., the thickness of the temperature distribution's positive tail) depends on prior beliefs about climate models' completeness and independence. It also demonstrates one means of using ice core data to better constrain climate predictions.
The second part of the talk describes recent work introducing the possibility of climate tipping points into economic models of climate change. It provides intuition for how different kinds of tipping points affect the optimal carbon tax and estimates that the near-term optimal tax increases by as much as 50% in particular cases. Finally, it combines multiple sources of uncertainty in a single analytic framework for economically evaluating climate targets. Lemoine's work finds that uncertainty about high-temperature impacts and about technological outcomes are more important for economic evaluations than is the possibility of extreme temperature outcomes.