What Is Uncertain in Climate Economics?

One of the central problems of a majority of economic integrated assessment models of climate change is that they mostly ignore or at best underplay all the uncertainty around the problem they try to analyse. Meanwhile, these models are mostly presented in calibrated form, i.e. including concrete values for different variables – just what a cost-benefit analysis is expected to do. Even if there are some confidence intervals specified, they are mostly rather crude and are a kind of sherry-picking of “meaningful” uncertainties. However, the dynamics of the climate itself and the consequences of his changing are profoundly uncertain and full of feedback mechanisms. In the following I would like to present and discuss some major sources of uncertainty in economic climate modelling, arguing that it is even deeper than in “just” climate modelling and that the consequences for standard approaches are profound. Continue reading

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