Working Paper: NBER ID: w28472
Authors: Nicholas Stern; Joseph E. Stiglitz; Charlotte Taylor
Abstract: Designing policy for climate change requires analyses which integrate the interrelationship between the economy and the environment. We argue that, despite their dominance in the economics literature and influence in public discussion and policymaking, the methodology employed by Integrated Assessment Models (IAMs) rests on flawed foundations, which become particularly relevant in relation to the realities of the immense risks and challenges of climate change, and the radical changes in our economies that a sound and effective response require. We identify a set of critical methodological problems with the IAMs which limit their usefulness and discuss the analytic foundations of an alternative approach that is more capable of providing insights into how best to manage the transition to net-zero emissions.
Keywords: climate change; extreme risk; market imperfections; climate policy; integrated assessment; social welfare; innovation
JEL Codes: H0; Q0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| IAMs flaws (L15) | inadequate reflection of climate change risks (Q54) |
| IAMs flaws (L15) | misleading conclusions on temperature increases (Q54) |
| IAMs flaws (L15) | insufficient guidance on climate goals (Q54) |
| reliance on IAMs (O19) | narrow focus on carbon pricing (Q58) |
| IAMs outputs sensitivity (C67) | concerns about robustness (C59) |
| need for diverse models (C52) | effective policy responses (D78) |