A balance of questions: what can we ask of climate change economics?

Research output: Working paperDiscussion paper

Abstract

The standard approach to the economics of climate change, which has its best known implementation in Nordhaus’s DICE and RICE models (well described in Nordhaus’s 2008 book, A Question of Balance]) is not well equipped to deal with the possibility of catastrophe, since we are unable to evaluate a risk averse representative agent’s expected utility when there is any significant probability of zero consumption. Whilst other authors attempt to develop new tools with which to address these problems, the simple solution proposed in this paper is to ask a question that the currently available tools of climate change economics are capable of answering. Rather than having agents optimally choosing a path (that differs from the recommendations of climate scientists) within models which cannot capture the essential features of the problem, I argue that economic models should be used to determine the savings and investment paths which implement climate targets that have been suggested in the physical science literature.
LanguageEnglish
Number of pages24
Publication statusE-pub ahead of print - 6 Jan 2013

Publication series

NameSIRE DISCUSSION PAPER
PublisherScottish Institute for Research in Economics
No.SIRE-DP-2013-12

Fingerprint

Economics
Climate change
Climate
Risk-averse
Savings
Expected utility
Catastrophe
Representative agent

Keywords

  • climate change
  • catastrophe
  • optimal policy
  • alternative energy investment

Cite this

Comerford, D. (2013). A balance of questions: what can we ask of climate change economics? (SIRE DISCUSSION PAPER; No. SIRE-DP-2013-12).
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A balance of questions: what can we ask of climate change economics? / Comerford, David.

2013. (SIRE DISCUSSION PAPER; No. SIRE-DP-2013-12).

Research output: Working paperDiscussion paper

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Comerford D. A balance of questions: what can we ask of climate change economics? 2013 Jan 6. (SIRE DISCUSSION PAPER; SIRE-DP-2013-12).