Are economists getting climate dynamics right and does it matter?

Dietz, Simon ORCID: 0000-0001-5002-018X, van der Ploeg, Frederick, Rezai, Armon and Venmans, Frank ORCID: 0000-0002-4264-6606 (2021) Are economists getting climate dynamics right and does it matter? Journal of the Association of Environmental and Resource Economists, 8 (5). 895 - 921. ISSN 2333-5955

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Abstract

We show that economic models of climate change produce climate dynamics inconsistent with current climate science models: (i) the delay between CO 2 emissions and warming is much too long and (ii) positive carbon cycle feedbacks are mostly absent. These inconsistencies lead to biased economic policy advice. Controlling for how the economy is represented, different climate models result in significantly different optimal CO 2 emissions. A long delay between emissions and warming leads to optimal carbon prices that are too low and attaches too much importance to the discount rate. Similarly we find that omitting positive carbon cycle feedbacks leads to optimal carbon prices that are too low. We conclude that it is important for policy purposes to bring economic models in line with the state of the art in climate science, and we make practical suggestions for how to do so.

Item Type:	Article
Official URL:	https://www.journals.uchicago.edu/toc/jaere/curren...
Additional Information:	© 2021 The University of Chicago Press
Divisions:	Geography & Environment Grantham Research Institute
Subjects:	H Social Sciences > HC Economic History and Conditions G Geography. Anthropology. Recreation > GE Environmental Sciences
JEL classification:	Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Date Deposited:	22 Feb 2021 15:15
Last Modified:	17 Apr 2024 04:33
URI:	http://eprints.lse.ac.uk/id/eprint/108887

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