Working Paper: NBER ID: w20900
Authors: Mark C. Freeman; Gernot Wagner; Richard J. Zeckhauser
Abstract: Climate change is real and dangerous. Exactly how bad it will get, however, is uncertain. Uncertainty is particularly relevant for estimates of one of the key parameters: equilibrium climate sensitivity—how eventual temperatures will react as atmospheric carbon dioxide concentrations double. Despite significant advances in climate science and increased confidence in the accuracy of the range itself, the “likely” range has been 1.5-4.5°C for over three decades. In 2007, the Intergovernmental Panel on Climate Change (IPCC) narrowed it to 2-4.5°C, only to reverse its decision in 2013, reinstating the prior range. In addition, the 2013 IPCC report removed prior mention of 3°C as the “best estimate.” \n \nWe interpret the implications of the 2013 IPCC decision to lower the bottom of the range and excise a best estimate. Intuitively, it might seem that a lower bottom would be good news. Here we ask: When might apparently good news about climate sensitivity in fact be bad news? The lowered bottom value also implies higher uncertainty about the temperature increase, a definite bad. Under reasonable assumptions, both the lowering of the lower bound and the removal of the “best estimate” may well be bad news.
Keywords: climate sensitivity; uncertainty; willingness to pay
JEL Codes: D81; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decrease in mean climate sensitivity (Q54) | increase in WTP (D69) |
| lowering of lower bound of climate sensitivity range (Q54) | increase in WTP (D69) |
| increase in variance of climate sensitivity distribution (C46) | increase in WTP (D69) |
| removal of best estimate for climate sensitivity (C51) | increase in WTP (D69) |
| increase in standard deviation of climate sensitivity distribution (C46) | increase in WTP (D69) |