Working Paper: NBER ID: w18205
Authors: Robert S. Pindyck
Abstract: Climate policy poses a dilemma for environmental economists. The economic argument for stringent GHG abatement is far from clear. There is disagreement among both climate scientists and economists over the likelihood of alternative climate outcomes, over the nature and extent of the uncertainty over those outcomes, and over the framework that should be used to evaluate potential benefits from GHG abatement, including key policy parameters. I argue that the case for stringent abatement cannot be based on the kinds of modeling exercises that have permeated the literature, but instead must be based on the possibility of a catastrophic outcome. I discuss how an analysis that incorporates such an outcome might be conducted.
Keywords: climate policy; greenhouse gas abatement; economic impact; catastrophic outcomes
JEL Codes: D81; Q51; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ghg emissions (Q54) | economic justification for abatement (Q52) |
| potential catastrophic outcomes (H84) | stringent ghg abatement policies (Q58) |
| uncertainties about economic impacts (F69) | policy recommendations (D78) |
| rate of time preference (D15) | economic viability of climate policies (Q58) |
| index of relative risk aversion (D11) | economic viability of climate policies (Q58) |
| societal willingness to invest in climate policy (P18) | perceived urgency for stringent ghg abatement (Q58) |