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Integrated assessment of abrupt climatic changes

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  • Michael D. Mastrandrea
  • Stephen H. Schneider

Abstract

One of the most controversial conclusions to emerge from many of the first generation of integrated assessment models (IAMs) of climate policy was the perceived economic optimality of negligible near-term abatement of greenhouse gases.Typically, such studies were conducted using smoothly varying climate change scenarios or impact responses. Abrupt changes observed in the climatic record and documented in current models could substantially alter the stringency of economically optimal IAM policies. Such abrupt climatic changes-or consequent impacts-would be less foreseeable and provide less time to adapt, and thus would have far greater economic or environmental impacts than gradual warming.We extend conventional, smooth IAM analysis by coupling a climate model capable of one type of abrupt change to a well-established energy-economy model (DICE).We compare the DICE optimal policy using the standard climate sub-model to our version that allows for abrupt change-and consequent enhanced climate damage-through changes in the strength (and possible collapse) of the North Atlantic thermohaline circulation (THC). We confirm the potential significance of abrupt climate change to economically optimal IAM policies, thus calling into question all previous work neglecting such possibilities-at the least for the wide ranges of relevant social and climate system parameters we consider. In addition, we obtain an emergent property of our coupled social-natural system model: "optimal policies" that do consider abrupt changes may, under relatively low discount rates, calculate emission control levels sufficient to avoid significant abrupt change, whereas "optimalpolicies" disregarding abrupt change would not prevent this non-linear event. However, there is a threshold indiscount rate above which the present value of future damages is so low that even very large enhanced damages in the 22nd century, when a significant abrupt change such as a THC collapse would be most likely to occur, do not increase optimal control levels sufficiently to prevent such a collapse. Thus, any models not accounting for potential abrupt non-linear behavior and its interaction with the discounting formulation are likely to miss an important set of possibilities relevant to the climate policy debate.

Suggested Citation

  • Michael D. Mastrandrea & Stephen H. Schneider, 2001. "Integrated assessment of abrupt climatic changes," Climate Policy, Taylor & Francis Journals, vol. 1(4), pages 433-449, December.
  • Handle: RePEc:taf:tcpoxx:v:1:y:2001:i:4:p:433-449
    DOI: 10.3763/cpol.2001.0146
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    Cited by:

    1. Yacov Tsur & Amos Zemel, 2009. "Endogenous Discounting and Climate Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 44(4), pages 507-520, December.
    2. Balint, T. & Lamperti, F. & Mandel, A. & Napoletano, M. & Roventini, A. & Sapio, A., 2017. "Complexity and the Economics of Climate Change: A Survey and a Look Forward," Ecological Economics, Elsevier, vol. 138(C), pages 252-265.
    3. Mariia Belaia & Michael Funke & Nicole Glanemann, 2017. "Global Warming and a Potential Tipping Point in the Atlantic Thermohaline Circulation: The Role of Risk Aversion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(1), pages 93-125, May.
    4. Kent D. Daniel & Robert B. Litterman & Gernot Wagner, 2016. "Applying Asset Pricing Theory to Calibrate the Price of Climate Risk," NBER Working Papers 22795, National Bureau of Economic Research, Inc.
    5. Gerlagh, Reyer & Jaimes, Richard & Motavasseli, Ali, 2017. "Global Demographic Change and Climate Policies," Other publications TiSEM 7a4ee2a9-e025-4ec0-8bc8-f, Tilburg University, School of Economics and Management.
    6. Karp, Larry & Tsur, Yacov, 2011. "Time perspective and climate change policy," Journal of Environmental Economics and Management, Elsevier, vol. 62(1), pages 1-14, July.
    7. P. Michael Link & Richard S. J. Tol, 2004. "Possible economic impacts of a shutdown of the thermohaline circulation: an application of FUND," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 3(2), pages 99-114, September.
    8. Claudia Kemfert, Truong P. Truong, and Thomas Bruckner, 2006. "Economic Impact Assessment of Climate Change - A Multi-gas Investigation with WIAGEM-GTAPEL-ICM," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 441-460.
    9. repec:hal:spmain:info:hdl:2441/1nlv566svi86iqtetenms15tc4 is not listed on IDEAS
    10. Nicolas Taconet & Céline Guivarch & Antonin Pottier, 2019. "Social Cost of Carbon under stochastic tipping points: when does risk play a role?," Working Papers 2019.11, FAERE - French Association of Environmental and Resource Economists.
    11. Karp, Larry & Tsur, Yacov, 2007. "Discounting and Climate Change Policy," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5sm6j36x, Department of Agricultural & Resource Economics, UC Berkeley.
    12. Kousky, Carolyn & Kopp, Robert E. & Cooke, Roger M., 2011. "Risk premia and the social cost of carbon: A review," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 5, pages 1-24.
    13. Irene Lorenzoni & Nick F. Pidgeon & Robert E. O'Connor, 2005. "Dangerous Climate Change: The Role for Risk Research," Risk Analysis, John Wiley & Sons, vol. 25(6), pages 1387-1398, December.
    14. Ram Ranjan, 2014. "Optimal carbon mitigation strategy under non-linear feedback effects and in the presence of permafrost release trigger hazard," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(4), pages 479-497, April.
    15. Heiko Wirths & Joachim Rathmann & Peter Michaelis, 2018. "The permafrost carbon feedback in DICE-2013R modeling and empirical results," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(1), pages 109-124, January.
    16. Leizarowitz, Arie & Tsur, Yacov, 2012. "Renewable resource management with stochastic recharge and environmental threats," Journal of Economic Dynamics and Control, Elsevier, vol. 36(5), pages 736-753.
    17. Iverson, Terrence, 2012. "Optimal Carbon Taxes with Non-Constant Time Preference," MPRA Paper 43264, University Library of Munich, Germany.
    18. Karp, Larry S. & Tsur, Yacov, 2007. "Climate Policy When The Distant Future Matters: Catastrophic Events With Hyperbolic Discounting," Discussion Papers 7181, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    19. T. Bruckner & K. Zickfeld, 2009. "Emissions corridors for reducing the risk of a collapse of the Atlantic thermohaline circulation," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(1), pages 61-83, January.
    20. Yongyang Cai & Kenneth L. Judd & Thomas S. Lontzek, 2013. "The Social Cost of Stochastic and Irreversible Climate Change," NBER Working Papers 18704, National Bureau of Economic Research, Inc.
    21. Yongyang Cai & Thomas S. Lontzek, 2019. "The Social Cost of Carbon with Economic and Climate Risks," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2684-2734.
    22. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer.
    23. Kopp, Robert E. & Golub, Alexander & Keohane, Nathaniel O. & Onda, Chikara, 2012. "The influence of the specification of climate change damages on the social cost of carbon," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-40.
    24. repec:spo:wpmain:info:hdl:2441/1nlv566svi86iqtetenms15tc4 is not listed on IDEAS

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