Do climate dynamics matter for economics? - Nature.com

Economic models of climate change are the basis for climate policy design. However, incorrect representation of physical dynamics in these models could lead to biased advice.

How stringent should climate policy be? What is the cheapest way to achieve a long-term temperature target? These are two key questions in the economics of climate change¹. The answers depend on the dynamics of the carbon cycle and the climate. If CO₂ degrades faster in the atmosphere, then we would need to worry less about current emissions and more about future emissions. If the world warms faster, then damages are larger and we would need to cut emissions faster. In a recent paper, Simon Dietz and colleagues² show that commonly used integrated assessment models, the workhorses of climate-policy analysis, are out of step with the latest climate science. Specifically, short-term warming is too low, long-term warming is too high, CO₂ stays too long in the atmosphere, and climate change does not affect the carbon cycle. These effects pull in different directions, with potential implications for policy recommendations on the optimum carbon price.

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Fig. 1: The uncertainty about the social cost of carbon.

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Affiliations

1. Department of Economics, University of Sussex, Jubilee Building, Falmer, UK

   Richard S. J. Tol

2. Institute for Environmental Studies, Vrije Universiteit, Amsterdam, the Netherlands

   Richard S. J. Tol

3. Department of Spatial Economics, Vrije Universiteit, Amsterdam, the Netherlands

   Richard S. J. Tol

4. Tinbergen Institute, Amsterdam, the Netherlands

   Richard S. J. Tol

5. CESifo, Munich, Germany

   Richard S. J. Tol

6. Payne Institute for Public Policy, Colorado School of Mines, Golden, CO, USA

   Richard S. J. Tol

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1. Richard S. J. Tol
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Correspondence to Richard S. J. Tol.

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Tol, R.S.J. Do climate dynamics matter for economics?. Nat. Clim. Chang. (2021). https://ift.tt/3kWIFJ0

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• Published: 30 September 2021

• DOI: https://doi.org/10.1038/s41558-021-01169-5

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