Working Paper: NBER ID: w21463
Authors: Mark C. Freeman; Ben Groom; Richard Zeckhauser
Abstract: The initial hope for climate science was that an improved understanding of what the future might bring would lead to appropriate public policies and effective international climate agreements. Even if that hope is not realized, as now seems likely, scientific advances leading to a more refined assessment of the uncertainties surrounding the future impacts of climate change would facilitate more appropriate adaptation measures. Such measures might involve shifting modes or locales of production, for example. This article focuses on two broader tools: consumption smoothing in anticipation of future losses, and physical adaptation measures to reduce damages. It shows that informative signals on climate-change effects lead to better decisions in the use of each tool.
Keywords: climate change; adaptation; scientific research; decision-making; uncertainty
JEL Codes: D8; D83; E21; H41; H43; Q5; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| improved signals about climate change (Q54) | better adaptation decisions (D79) |
| arrival of informative signals (D83) | update beliefs about future climate states (D84) |
| update beliefs about future climate states (D84) | influence macro-consumption-saving decisions (E21) |
| good signal increases probability of moderate climate change scenario (Q54) | lower precautionary savings (D14) |
| good signal increases probability of moderate climate change scenario (Q54) | higher consumption (D12) |
| bad signal raises probability of severe climate change (Q54) | save more to buffer against potential losses (D14) |
| better information reduces uncertainty (D80) | enhances expected utility (D81) |