CIP session 14: Integrated Assessment models of climate change

Question 1

Where is the optimal level of abatement

Answer 1

At the intersection of marginal abatement costs and marginal abatement benefits

Question 2

Included and excluded categories of IAMs

Answer 2

included: agriculture and fishery, industry, coast zones and urban areas, energy use, tourism and recreation, health
Excluded: economic growth rate, political instability,, migration flows, large biodiversity losses, natural disasters

Question 3

pro and con of IAMs

Answer 3

PRO: non-market effects are also included, expressed in monetary terms.
CON: based on the categories, climate costst are probably underestimated

Question 4

Discount rate: What is it used for and what is the motivation to use it?

Answer 4

The discount rate is used to translate future climate change costs in present values by giving a lower weight to costs that occur further away in the future. A higher discount rate implies that a lower weight is given to future costs.
- express impatience; indivuals prefer money now
- future costs matter less if wealth increases due to economic growth

Question 5

what is a descriptive approach for setting discount rate?

Answer 5

High discount rate between 4.5% and 6%. This implies that far future climate impacts get a negligible weight in current optimal policy.

Question 6

Prescriprive approach

Answer 6

Low discount rate around 1.5%. which is consistent with low long run economic growth. This implies far future climate impacts get a small, but not negligible weight.

Question 7

Characteristics of DICE model

Answer 7

• most widely used IAM
• single model for enitite globe (regiona RICE)
• investments are made in emission abatement to limit climate impacts.

Question 8

Key results of DICE model

Answer 8

• Total cost of unmitigated climate change
• Marginal cost expressed as social costs of carbon
• Optimal pathway for greenhouse gas emissions

Question 9

Diminishing marginal utility

Answer 9

consumers receive more satisfaction from more income and goods, but this becomes smaller when they become richer

Question 10

General uncertainties of IAMs

Answer 10

• different results across models
• structural or parameter uncertainty
• shape of the damage function