The Social Cost of Stochastic and Irreversible Climate Change
12:00 - 13:30
There is great uncertainty about the impact of anthropogenic carbon on future economic wellbeing. We use DSICE, a DSGE extension of the DICE2007 model of William Nordhaus, which incorporates beliefs about the uncertain economic impact of possible climate tipping events and uses empirically plausible parameterizations of Epstein-Zin preferences to represent attitudes towards risk. We find that the uncertainty associated with anthropogenic climate change imply carbon taxes much higher than implied by deterministic models. This analysis indicates that there is much greater urgency to immediately enacting significant GHG policies than implied by DICE2007 and similar models that ignore uncertainty.
The seminar will be held in the framework of the ADVANCE project (ADVANCE – Advanced Model Development and Validation for the Improved Analysis of Costs and Impacts of Mitigation Policies, Grant Agreement n. 308329).
This seminar has been jointly organized by FEEM and IEFE, Bocconi University.