Chapter

Modeling the Impact of Warming in Climate Change Economics

Robert S. Pindyck

in The Economics of Climate Change

Published by University of Chicago Press

Published in print June 2011 | ISBN: 9780226479880
Published online February 2013 | e-ISBN: 9780226479903 | DOI: http://dx.doi.org/10.7208/chicago/9780226479903.003.0003
Modeling the Impact of Warming in Climate Change Economics

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The chapter incorporates distributions for temperature change and its possible economic impacts derived from studies assembled by the Intergovernmental Panel on Climate Change (IPCC) and from integrated assessment models (IAMs) into an analysis of climate change policy. It models the relationship between temperature change and the growth of gross domestic product (GDP) using a thin-tailed distribution for temperature change inferred from studies surveyed by the IPCC and a zero discount rate. Most quantitative economic studies of climate change policy utilize a “damage function” that relates temperature change directly to the levels of real GDP and consumption. This approach is reasonably simple in that any projected path for temperature can be directly translated into an equivalent path for consumption. On both theoretical and empirical grounds, the economic impact of warming should be modeled as a relationship between temperature change and the growth rate of GDP as opposed to the level of GDP. This means that warming can have a permanent impact on future GDP and consumption.

Keywords: climate change economics; Intergovernmental Panel on Climate Change; gross domestic product; temperature change; consumption; climate change policy

Chapter.  8479 words.  Illustrated.

Subjects: Economic Development and Growth

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