Robert Pindyck on climate models

By Paul Walker 03/09/2013

Robert Pindyck has a recent NBER working paper that looks at one of the critical tools used in climate policy:

Climate Change Policy: What Do the Models Tell Us?
Robert S. Pindyck
NBER Working Paper No. 19244, July 2013
The abstract answers the question in the paper’s title:

Very little. A plethora of integrated assessment models (IAMs) have been constructed and used to estimate the social cost of carbon (SCC) and evaluate alternative abatement policies. These models have crucial flaws that make them close to useless as tools for policy analysis: certain inputs (e.g. the discount rate) are arbitrary, but have huge effects on the SCC estimates the models produce; the models’ descriptions of the impact of climate change are completely ad hoc, with no theoretical or empirical foundation; and the models can tell us nothing about the most important driver of the SCC, the possibility of a catastrophic climate outcome. IAM-based analyses of climate policy create a perception of knowledge and precision, but that perception is illusory and misleading.

0 Responses to “Robert Pindyck on climate models”

  • Judging from the abstract and the institution, he’s talking about economic models of climate change impacts, not climate models (e.g., GCMs, RCMs).

    • Indeed. The economic models take the scientific models as given and then try to assess on a cost-benefit basis how much carbon-abatement is optimal considering the longer-term costs of global warming as well as the costs of implementing abatement, and how much we should instead deal with by adaptation measures, like moving people inland. But the two really big problems are arguments about the discount rate (tradeoffs between costs now and costs a century from now are hard to deal with. Between now and a decade from now, that’s all good. But over a century or more it’s a problem) and about how we should treat the risk of really bad outcomes. Martin Weitzman mostly models this stuff on an insurance argument: there’s a non-trivial but still small risk of catastrophic global warming outcomes. How much should we pay to, in essence, buy insurance against those kinds of outcomes. Take on some costs now that are high relative to the expected benefits, but that avert the chances of really really bad stuff. That’s tough where it’s hard to quantify these low-probability risks.