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Modeling Climate Policies: The Social Cost of Carbon and Uncertainties in Climate Predictions

Abstract

This chapter examines two approaches to climate policy: expected utility calculations and a precautionary approach. The former provides the framework for attempts to calculate the social cost of carbon (SCC). The latter approach has provided the guiding principle for the United Nations Conference of Parties from the 1992 Rio Declaration to the Paris Agreement. The chapter argues that the deep uncertainties concerning the climate system and climate damages make the exercise of trying to calculate a well-supported value for the SCC impossible. Moreover, cost-benefit analyses are blind to important moral dimensions of the climate problem. Yet it is an open question to what extent an alternative, precautionary approach can result in specific policy recommendations such as the temperature targets of the Paris agreement.

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Fig. 14.1
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Notes

  1. 1.

    In a memo leaked to the press. See https://cleantechnica.com/2016/12/08/leaked-transition-team-memo-outlines-trumps-catastrophic-energy-agenda/ accessed Feb 17, 2017, 1 pm EST.

  2. 2.

    https://www3.epa.gov/climatechange/Downloads/EPAactivities/social-cost-carbon.pdf accessed on 2/25/2017.

  3. 3.

    For other critical discussions of integrated assessment models, see Ackerman et al. (2009); Frisch (2013); Pindyck (2013).

  4. 4.

    For an explanation of the two axis along with the IPCC report expresses confidence, see the IPCC Guidance Note (Mastrandrea et al. 2010).

  5. 5.

    See also the discussion of discount rates in Posner and Weisbach (2010) and the criticism thereof in Frisch (2012).

  6. 6.

    Here is how Frank Ramsey put the issue: “it is assumed that we do not discount later enjoyments in comparison with earlier ones, a practice which is ethically indefensible and arises merely from the weakness of the imagination” (quoted in Weitzman 2012).

  7. 7.

    See Interagency Working Group on Social Cost of Carbon (2010).

  8. 8.

    Just how much uncertainty remains, especially as far as regional predictions of changes to the climate system are concerned, has recently been underscored by World Climate Research Programme Director David Carlson of the WMO, who in the context of discussing “heat waves” in the Arctic in the winter of 2016/17 said: “Even without a strong El Niño in 2017, we are seeing other remarkable changes across the planet that are challenging the limits of our understanding of the climate system. We are now in truly uncharted territory,” (https://public.wmo.int/en/media/press-release/climate-breaks-multiple-records-2016-global-impacts, accessed on March 21, 2017).

  9. 9.

    https://thinkprogress.org/exxons-ceo-just-won-his-shareholders-rejected-climate-change-proposals-573d12dde5e7#.h7xpxfs4x. Accessed 2/28/2017.

  10. 10.

    While there are several formal frameworks for representing reasoning under conditions of severe uncertainty (for an overview, see Kunreuther et al. 2014), it remains to be seen to what extent these frameworks can provide tools for policy decisions.

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Frisch, M. (2018). Modeling Climate Policies: The Social Cost of Carbon and Uncertainties in Climate Predictions. In: A. Lloyd, E., Winsberg, E. (eds) Climate Modelling. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-65058-6_14

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