Moving targets—cost-effective climate policy under scientific uncertainty
The IPCC’s fifth assessment report of Working Group III has just come out. It pays special attention to the 2 °C temperature target and tells us that the window of opportunity to prevent such climate change is rapidly closing. Yet, the report also presents a portfolio of stabilization targets, reflecting a fundamental ambiguity: there is no unique “dangerous” climate threshold. Here, we describe a framework for the evaluation of optimal climate policy given an uncertain formal climate threshold. We find that uncertainty leads to moving targets: even when the available information does not change, future regulators will tend to relax current climate plans.
We develop a reduced form integrated assessment model to assess the quantitative significance of our findings. We calibrate preferences such that in 2000 a stabilization target of 450 ppmv maintains the optimal balance between climate risks and abatement costs. The naïve equilibrium ultimately reaches a peak of 570 ppmv, missing the 2000 stabilizations targets by a wide margin. Our results offer an explanation for the inertia in mitigation efforts over the past decades: policies often delay the majority of abatement efforts. Yet, believing that subsequent regulators will uphold the planned future efforts is self-defeating.
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