Modeling Scientific Uncertainty in the Economic Evaluation of Climate Change

November 21, 2011, 12:00pm - 1:00pm
Dr. Derek Lemoine, Assistant Professor of Economics at the University of Arizona
5825 University Research Court, Suite 3500
College Park, MD 20740

ABSTRACT: Climate policy must consider at least four sources of uncertainty: uncertainty about temperature change, uncertainty about damages along a temperature path, uncertainty about the possibility of abrupt changes or tipping points, and uncertainty about future low-carbon technology. The first part of the talk describes recent work introducing the possibility of climate tipping points into economic models of climate change. It provides intuition for how different kinds of tipping points affect the optimal carbon tax and finds that tipping points can increase the near-term optimal tax can by as much as 50%. The second part of the talk presents the speaker’s research on uncertainty about temperature change. It demonstrates how the possibility of extreme climate outcomes (i.e., the thickness of the temperature distribution’s positive tail) depends on prior beliefs about climate models’ completeness and independence. It also uses ice core data to estimate the strength of climate-carbon feedbacks. Finally, in ongoing work with JGCRI, we combine multiple sources of uncertainty in a single analytic framework for economically evaluating climate targets. We find that uncertainty about high-temperature impacts and about technological outcomes are more important for economic evaluations than is the possibility of extreme temperature outcomes. Related papers are available at the speaker’s web site (

BIOGRAPHY: Derek is an assistant professor in the the Department of Economics at the University of Arizona. He holds a Ph.D. in Energy and Resources (2011) and an M.A. in Economics (2010) from UC Berkeley. Derek’s interdisciplinary dissertation research was motivated by the uncertainty about the magnitude of temperature change produced by a given greenhouse gas emission path and about the technological change induced by a given policy path. This uncertainty complicates estimation of the benefits and costs of reducing emissions. He explored how the presence of this uncertainty could affect both the target and the form of climate policy. His other research has addressed the transition to electrified vehicles and low-carbon transportation systems, and he has published in journals specializing in environmental and energy economics, climate and atmospheric sciences, environmental science, energy technologies, and forestry.