How large Is the uncertainty about climate change

Cost-benefit analysis is only applicable if the variances of both costs and benefits are finite. In the case of climate change, the variances of the net present marginal costs and benefits of greenhouse gas emission reduction need to be finite. Finiteness is hard, if not impossible to prove. The opposite is easier to establish as one needs to shows that there is one, not impossible representation of the climate change with infinite variance. The paper shows that all relevant current variables of the FUND model have finite variances. However, there is a small chance that climate change reverses economic growth in some regions. In that case, the discount rate becomes negative and the net present marginal benefits of greenhouse gas emission reduction becomes very large. So large, that its variance is unbounded.

[1]  K. Hasselmann,et al.  Transport and storage of CO2 in the ocean ——an inorganic ocean-circulation carbon cycle model , 1987 .

[2]  Stephen C. Peck,et al.  Global warming uncertainties and the value of information: an analysis using CETA , 1993 .

[3]  Alan S. Manne,et al.  MERGE. A model for evaluating regional and global effects of GHG reduction policies , 1995 .

[4]  Stephen C. Peck,et al.  Optimal CO2 control policy with stochastic losses from temperature rise , 1995 .

[5]  Richard S. J. Tol,et al.  On the optimal control of carbon dioxide emissions: an application of FUND , 1997 .

[6]  Thomas Bruckner,et al.  The tolerable windows approach to integrated assessments , 1997 .

[7]  W. Nordhaus.  Managing the Global Commons: The Economics of Climate Change , 1994 .

[8]  Hadi Dowlatabadi.  Climate Change Thresholds and Guardrails for Emissions , 1999 .

[9]  Richard S. J. Tol,et al.  Methane Emission Reduction: An Application of FUND , 2003 .

[10]  M. Schlesinger,et al.  A sequential-decision strategy for abating climate change , 1992, Nature.

[11]  Richard S. J. Tol,et al.  The Marginal Costs of Greenhouse Gas Emissions , 1999 .

[12]  James K. Hammitt,et al.  Outcome and value uncertainties in global-change policy , 1995 .

[13]  D. Collard,et al.  Economics, growth and sustainable environments : essays in memory of Richard Lecomber , 1988 .

[14]  Klein Goldewijk Cgm,et al.  The IMAGE 2 Hundred Year (1890 - 1990) Data Base of the Global Environment (HYDE) , 1995 .

[15]  T. Teisberg,et al.  CETA: A Model for Carbon Emissions Trajectory Assessment , 1992 .

[16]  Richard S. J. Tol,et al.  Safe policies in an uncertain climate: an application of FUND , 1999 .

[17]  R. Tol.  Spatial and Temporal Efficiency in Climate Policy: Applications of FUND , 1999 .

[18]  D. Pearce,et al.  Extensions and alternatives to climate change impact valuation: on the critique of IPCC Working Group III's impact estimates , 1998, Environment and Development Economics.

[19]  L. Harvey.  Development of a risk-hedging CO2-emission policy, part II: Risks associated with measures to limit emissions, synthesis, and conclusions , 1996 .

[20]  R. Tol.  Estimates of the Damage Costs of Climate Change, Part II. Dynamic Estimates , 2002 .

[21]  A. Ulph,et al.  Uncertainty, Learning and International Environmental Policy Coordination , 1997 .

[22]  Charles D. Kolstad,et al.  Learning and Stock Effects in Environmental Regulation: The Case of Greenhouse Gas Emissions , 1996 .

[23]  Elisabeth Paté-Cornell,et al.  Uncertainties in global climate change estimates , 1996 .

[24]  Uncertainty, short-term hedging and the tolerable window approach , 1997 .

[25]  Stephen C. Peck,et al.  International CO2 emissions targets and timetables: An analysis of the AOSIS proposal , 1996 .

[26]  M. Schlesinger,et al.  When we don't know the costs or the benefits: Adaptive strategies for abating climate change , 1997 .

[27]  M. Leimbach.  Development of a Fuzzy optimization model, supporting global warming decision-making , 1996 .

[28]  Alan S. Manne,et al.  The Greenhouse Debate: Econonmic Efficiency, Burden Sharing and Hedging Strategies , 1995 .

[29]  W. Nordhaus.  To Slow or Not to Slow: The Economics of the Greenhouse Effect , 1991 .

[30]  Richard S. J. Tol,et al.  New Estimates of the Damage Costs of Climate Change , 1998 .

[31]  R. Tol.  Kyoto, Efficiency, and Cost-Effectiveness: Applications of FUND , 1999 .

[32]  R. Tol.  On the difference in impact of two almost identical climate change scenarios , 1998 .

[33]  Charles D. Kolstad.  George Bush versus Al Gore : irreversibilities in greenhouse gas accumulation and emission control investment , 1994 .

[34]  L. D. Danny Harvey,et al.  Development of a risk-hedging CO2-emission policy, part I: Risks of unrestrained emissions , 1996 .

[35]  William D. Nordhaus,et al.  Rolling the ‘DICE’: an optimal transition path for controlling greenhouse gases , 1993 .

[36]  William D. Nordhaus,et al.  What is the Value of Scientific Knowledge? An Application to Global Warming Using the PRICE Model , 1997 .

[37]  D. Collard.  Catastrophic Risk: or the Economics of Being Scared , 1988 .

[38]  H. Welsch.  Greenhouse gas abatement under ambiguity , 1995 .

[39]  William D. Nordhaus,et al.  A Regional Dynamic General-Equilibrium Model of Alternative Climate-Change Strategies , 1996 .

[40]  Joseph Alcamo,et al.  Emission scenarios and global climate protection , 1996 .

[41]  R. Tol,et al.  The damage costs of climate change toward more comprehensive calculations , 1995 .

[42]  J. Houghton,et al.  Climate change 1992 : the supplementary report to the IPCC scientific assessment , 1992 .

[43]  A. Manne,et al.  The Berlin Mandate: The costs of meeting post-2000 targets and timetables , 1996 .

[44]  Optimal greenhouse gas emissions under various assessments of climate change ambiguity , 1996 .

[45]  D. Pearce,et al.  The Aggregation of Climate Change Damages: a Welfare Theoretic Approach , 1997 .

[46]  Donald J. Wuebbles,et al.  Radiative forcing of climate , 1991 .

[47]  R. Tol.  Time Discounting and Optimal Emission Reduction: An Application of FUND , 1999 .

[48]  Gary W. Yohe,et al.  Near term mitigation policy for global change under uncertainty: Minimizing the expected cost of meeting unknown concentration thresholds , 1996 .

[49]  David Maddison,et al.  A cost-benefit analysis of slowing climate change , 1995 .

[50]  W. Nordhaus.  An Optimal Transition Path for Controlling Greenhouse Gases , 1992, Science.

[51]  D. Schimmelpfennig.  Uncertainty in economic models of climate-change impacts , 1996 .

[52]  A. Manne,et al.  On stabilizing CO2 concentrations – cost‐effective emission reduction strategies , 1997 .

[53]  Gary W. Yohe,et al.  The Tolerable Windows Approach: Lessons and Limitations , 1999 .

[54]  M. G. Morgan,et al.  Subjective judgments by climate experts. , 1995, Environmental science & technology.

[55]  Joseph Alcamo,et al.  The Global Climate System: Near Term Action for Long Term Protection , 1996 .

[56]  William D. Nordhaus,et al.  Expert opinion on climate change , 1994 .

[57]  Stephen C. Peck,et al.  Optimal carbon emissions trajectories when damages depend on the rate or level of global warming , 1994 .

[58]  Thomas Bruckner,et al.  The Tolerable Windows Approach: Theoretical and Methodological Foundations , 1999 .