Towards Impact Functions for Stochastic Climate Change

Richard Tol and Francisco Estrada

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: Most functions of economic impact assume that climate change is smooth. We here propose impact functions that have stochastic climate change as an input. These functions are identical in shape and have similar parameters as do deterministic impact functions. The mean stochastic impacts are thus similar to deterministic impacts. Welfare effects are larger, and the stochasticity premium is larger than the risk premium. Stochasticity is more important for past impacts than for future impacts.

Keywords: economic impact of climate change; stochasticity; risk premium (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Citations: View citations in EconPapers (2)

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http://www.sussex.ac.uk/economics/documents/wps-61-2013.pdf (application/pdf)

Related works:
Journal Article: TOWARD IMPACT FUNCTIONS FOR STOCHASTIC CLIMATE CHANGE (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:6113

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