Working Paper: NBER ID: w23319
Authors: William D. Nordhaus
Abstract: Many areas of the natural and social sciences involve complex systems that link together multiple sectors. Integrated assessment models (IAMs) are approaches that integrate knowledge from two or more domains into a single framework, and these are particularly important for climate change. One of the earliest IAMs for climate change was the DICE/RICE family of models, first published in Nordhaus (1992), with the latest version in Nordhaus (2017, 2017a). A difficulty in assessing IAMs is the inability to use standard statistical tests because of the lack of a probabilistic structure. In the absence of statistical tests, the present study examines the extent of revisions of the DICE model over its quarter-century history. The study finds that the major revisions have come primarily from the economic aspects of the model, whereas the environmental changes have been much smaller. Particularly sharp revisions have occurred for global output, damages, and the social cost of carbon. These results indicate that the economic projections are the least precise parts of IAMs and deserve much greater study than has been the case up to now, especially careful studies of long-run economic growth (to 2100 and beyond).
Keywords: Integrated Assessment Models; Climate Change; Social Cost of Carbon; Economic Projections
JEL Codes: C6; Q5; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic factors (P42) | major revisions in model outputs (C59) |
| improved understanding of economic growth dynamics and productivity (O49) | upward revision of future global output estimates (F01) |
| compounded revisions in driving variables (C39) | revision of social cost of carbon (SCC) (H43) |
| economic variables (P42) | larger adjustments in SCC compared to environmental variables (C29) |
| temperature increases (Q54) | slight upward revision (E01) |