PLEA Network

3 November 2015, Bloomberg View, What Economists Don’t Get About Climate Change. Economists tend to see climate change as a big optimization problem: Weigh the potential costs of future disasters against the benefits of fossil-fueled economic growth, and find a price of carbon that will balance the two. Unfortunately, it’s an illusory goal. The Cost of Carbon Consider, for example, a recent study by Yale University’s Kenneth Gillingham and colleagues. Using a collection of so-called “integrated” models of climate and the economy, they seek to get a better handle on how various uncertainties — in weather, population growth and technological development — might affect the price that policy makers should put on carbon. Their conclusion: No matter what happens, the optimal price in 2020 would probably be no more than about $50 per ton. The paper’s appearance may be timed to influence policy makers at the United Nations Climate Change Conference in Paris, which begins at the end of this month. It really shouldn’t, because it feigns certainty in areas where none is to be had. Granted, such integrated models include some realistic climate physics and economics. Yet their builders inevitably face crucial questions about which we know very little. For example, just how sensitive are global temperatures to the addition of further carbon dioxide? And how much economic damage can we expect from a temperature rise of, say, 2 degrees or 5 degrees? Read More here