Integrated Economic and Climate Modeling

100 Pages Posted: 9 Dec 2011

See all articles by William D. Nordhaus

William D. Nordhaus

Yale University - Department of Economics; Cowles Foundation, Yale University; National Bureau of Economic Research (NBER)

Date Written: December 9, 2011

Abstract

This survey examines the history and current practice in integrated assessment models (IAMs) of the economics of climate change. It begins with a review of the emerging problem of climate change. The next section provides a brief sketch of the rise of IAMs in the 1970s and beyond. The subsequent section is an extended exposition of one IAM, the DICE/RICE family of models. The purpose of this description is to provide readers an example of how such a model is developed and what the major components are. The final section discusses major important open questions that continue to occupy IAM modelers. These involve issues such as the discount rate, uncertainty, the social cost of carbon, the potential for catastrophic climate change, algorithms, and fat-tailed distributions. These issues are ones that pose both deep intellectual challenges as well as important policy implications for climate change and climate-change policy.

Keywords: Climate change, Integrated assessment models, Environmental economics, Social cost of carbon, Large-scale mathematical models

JEL Classification: Q5, Q54, C6, H4

Suggested Citation

Nordhaus, William D., Integrated Economic and Climate Modeling (December 9, 2011). Cowles Foundation Discussion Paper No. 1839, Available at SSRN: https://ssrn.com/abstract=1970295 or http://dx.doi.org/10.2139/ssrn.1970295

William D. Nordhaus (Contact Author)

Yale University - Department of Economics ( email )

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Cowles Foundation, Yale University ( email )

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National Bureau of Economic Research (NBER)

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