Are economists getting climate dynamics right and does it matter?

Simon Dietz, Frederick (Rick) van der Ploeg, Armon Rezai and Frank Venmans

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We show that economic models of climate change produce climate dynamics inconsistent with current climate science models: (i) the delay between CO 2 emissions and warming is much too long and (ii) positive carbon cycle feedbacks are mostly absent. These inconsistencies lead to biased economic policy advice. Controlling for how the economy is represented, different climate models result in significantly different optimal CO 2 emissions. A long delay between emissions and warming leads to optimal carbon prices that are too low and attaches too much importance to the discount rate. Similarly we find that omitting positive carbon cycle feedbacks leads to optimal carbon prices that are too low. We conclude that it is important for policy purposes to bring economic models in line with the state of the art in climate science, and we make practical suggestions for how to do so.

Keywords: carbon cycle; carbon price; climate change; integrated assessment modelling; positive feedbacks; social cost of carbon (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2021-09-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (44)

Published in Journal of the Association of Environmental and Resource Economists, 1, September, 2021, 8(5), pp. 895 - 921. ISSN: 2333-5955

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http://eprints.lse.ac.uk/108887/ Open access version. (application/pdf)

Related works:
Journal Article: Are Economists Getting Climate Dynamics Right and Does It Matter? (2021)
Working Paper: Are Economists Getting Climate Dynamics Right and Does It Matter? (2020)
Working Paper: Are economists getting climate dynamics right and does it matter? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:108887

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