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DICE Simplified

Abstract

We analyze Nordhaus’ DICE model and show that the temperature and CO2 equations are needlessly complicated and can be simplified without loss of essence. In addition, we argue that the damage function can be altered in such a way that it lends itself to experiments involving extreme risk. We conclude that, within the philosophy of the DICE model, significant simplifications can be made which make the model more transparent, more robust, and easier to apply.

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Data Availability

Not applicable.

Code availability

Code is available upon request.

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Acknowledgments

We are grateful to the editor and advisory editor, and to Peter Boswijk, Rick van der Ploeg, and Hiroaki Sakamoto for comments and suggestions.

Funding

This research was funded in part by the Japan Society for the Promotion of Science (JSPS), KAKENHI Grant JP19K01669 (Ikefuji), and the Netherlands Organization for Scientific Research (NWO) under grant Vidi-2009 (Laeven).

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Correspondence to Masako Ikefuji.

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The authors have no relevant financial or non-financial interests to disclose.

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Appendix

Appendix

In this Appendix, we present two tables which together contain all variable and parameter definitions required to compute the optimum in DICE (the Nordhaus model) and S-DICE (our simplified version of DICE): the variables employed in S-DICE and DICE and their relationship, and the initial values of the six state variables of DICE (Table 4); and the parameters employed in S-DICE and DICE and their relationship (Table 5).

Table 4 Variables in S-DICE and DICE
Table 5 Parameters in S-DICE and DICE

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Ikefuji, M., Laeven, R.J.A., Magnus, J.R. et al. DICE Simplified. Environ Model Assess 26, 1–12 (2021). https://doi.org/10.1007/s10666-020-09738-2

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Keywords

  • DICE model
  • Climate change
  • Integrated assessment model
  • Optimal policy
  • Damage function