Integrated Assesment Models (IAMs) Flashcards
What are Integrated Assessment Models (IAMs)?
- IAMs are quantitative models that describe the global interplay between the economy and the climate
- They integrate theories and empirical results from physics, chemistry, and economics.
In short: simplified representations of economy, climate, and impact mechanisms in order to explore trade-offs in policy
Who is associated with the development of the first integrated assessment model?
William Nordhaus is credited with creating the first integrated assessment model in the mid-1990s, which describes the interaction between the economy and the climate.
What is the purpose of Nordhaus’ integrated assessment model?
- To simulate the co-evolution of the economy and the climate.
- It helps examine the consequences of climate policy interventions, such as carbon taxes.
What is the trade-off logic in IAMs like DICE?
IAMs, including DICE, incorporate a trade-off logic where economies make investments in capital and emissions reductions, sacrificing consumption in the present to lower climate damages and enhance consumption in the future.
Why are IAMs useful?
IAMs help answer important policy questions related to climate change.
They:
- estimate the Social Cost of Carbon,
- compare the costs of pollution reduction to the costs of climate change, and
- are utilized by many nations in decision-making processes.
What is the Social Cost of Carbon (SCC)?
The SCC is the overall monetary estimate of the damage caused by emitting each additional ton of carbon dioxide.
It is used to evaluate the costs and benefits of different climate policies and regulations.
Which models does the United States Government base its SCC estimate on?
The United States Government uses William Nordhaus’ DICE model, Richard Tol’s FUND model, and Chris Hope’s PAGE model as the basis for its SCC estimate.
Write down the formular of an Integrated Assessment Model
What are some criticisms of Integrated Assessment Models (IAMs) regarding damages?
Stern criticizes IAMs for underestimating damages and assuming strong underlying growth and modest damages from temperature increases, which is far from a central case, particularly for severe warming (>3°C).
What are damage functions in IAMs?
- Damage functions, denoted as D(T), estimate the level of damages caused by temperature increases.
- IAMs project small damages at high temperatures, such as +4°C resulting in 4% of GDP in DICE and FUND models and 1% of GDP in the PAGE model.
What aspects are often omitted from IAMs in terms of impact coverage?
Some impacts not fully accounted for in IAMs include
- the collapse of land-based polar ice sheets,
- release of seabed methane,
- interaction with ecosystems and biodiversity,
- ocean acidification,
- collapse of the Amazon forest.
What is the difference between the bottom-up and top-down procedures in estimating damage functions?
The bottom-up procedure (IAM) involves
- simulating physical impacts,
- monetizing each impact, and
- extrapolating the functional relation between damage and temperature.
The top-down procedure compares economic output in hotter years to average temperature years across countries.
Top-down procedure shows much
larger losses than bottom-up
What are the advantages of the top-down procedure in estimating damage functions?
The top-down procedure
- captures interaction effects
- avoids the critique of omission of impact types
- considers some adaptation measures.
What are the disadvantages of the top-down procedure in estimating damage functions?
The top-down procedure fails to capture
- welfare effects of non-market climate impacts, such as health or ecosystems
- climate variables like sea-level rise and ocean acidification.
What is the purpose of an Integrated Assessment Model (IAM)?
IAMs provide a simplified representation of the economy, climate, and impact mechanisms to explore trade-offs in policy design and inform decision-making processes related to climate change mitigation and adaptation.
