Limitations of integrated assessment models of climate change

By F. Ackerman, Stephen J. DeCanio, Richard B. Howarth, K. Sheeran. 2009

355 citations recorded by the source corpus.

The integrated assessment models (IAMs) that economists use to analyze the expected costs and benefits of climate policies frequently suggest that the “optimal” policy is to go slowly and to do relatively little in the near term to reduce greenhouse gas emissions. We trace this finding to the contestable assumptions and limitations of IAMs. For example, they typically discount future impacts from climate change at relatively high rates. This practice may be appropriate for short-term financial decisions but its extension to intergenerational environmental issues rests on several empirically and philosophically controversial hypotheses. IAMs also assign monetary values to the benefits of climate mitigation on the basis of incomplete information and sometimes speculative judgments concerning the monetary worth of human lives and ecosystems, while downplaying scientific uncertainty about the extent of expected damages. In addition, IAMs may exaggerate mitigation costs by failing to reflect the socially determined, path-dependent nature of technical change and ignoring the potential savings from reduced energy utilization and other opportunities for innovation. A better approach to climate policy, drawing on recent research on the economics of uncertainty, would reframe the problem as buying insurance against catastrophic, low-probability events. Policy decisions should be based on a judgment concerning the maximum tolerable increase in temperature and/or carbon dioxide levels given the state of scientific understanding. The appropriate role for economists would then be to determine the least-cost global strategy to achieve that target. While this remains a demanding and complex problem, it is far more tractable and epistemically defensible than the cost-benefit comparisons attempted by most IAMs.

Subfields: Economics and Econometrics, Management, Monitoring, Policy and Law

View Paper: https://www.semanticscholar.org/paper/6687d9e86cb392b563f513e413cd1b242c94d41d

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Citations in the corpus

The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models (2013, background): “5 Ackerman et al. 2009; Kopp, Hsiang, and Oppenheimer 2013. 6 In this paper, I make no distinction between risk and uncertainty. But Knightian uncertainty in terms of our having scant knowledge of key probabilities is an important issue—see also Stern (2007), p.”
A Third Wave in the Economics of Climate Change (2015, background): “This process of checking for historical consistency is known as “back testing”.8 Economic IAMs differ from physical climate models that are founded on universally accepted physical laws and are back-tested to make sure they can replicate reality (Ackerman et al. 2009).”
Bridging analytical approaches for low-carbon transitions (2016, neutral): “Ackerman and colleagues more generally suggest that “IAMs typically adopt conservative assumptions about the pace of technical change” and may “overestimate the costs of achieving stabilization targets” 55 .”
Report of the high-level commission on carbon prices (2017, background): “The valuation of non-market impacts can also be an important driver for higher climate impacts (van den Bergh and Botzen 2014; Ackerman et al. 2009).”
Tactical supply chain planning under a carbon tax policy scheme: A case study (2015, neutral): “Many of these estimates are made through integrated assessment models (IAM’s), which have their own limitations (Ackerman et al., 2009).”
Carbon Pricing: Effectiveness and Equity (2018, background): “The difficulties in measuring the monetary benefits of emission reductions have been discussed extensively in the literature (see, for example, Azar, 1998; Ackerman et al., 2009; Pindyck, 2013, 2017; Van den Bergh and Botzen, 2014; Howard and Sterner, 2017).”
Macroeconomic impact of stranded fossil fuel assets (2018, background): “Previously, such debates have often concerned simpler types of IAMs (e.g. DICE) 42-44 , while newer debates are emerging that address issues of framing and philosophy of science 45,46 .”
Maximum warming occurs about one decade after a carbon dioxide emission (2014, background): “…of estimating the amount of climate change that would result from various carbon dioxide emission or concentration scenarios (Leggett et al 1992, Ackerman et al 2009, Moss et al 2010) but there has been relatively little quantitative analysis of how long it takes to feel the consequences of an…”
Evaluating process-based integrated assessment models of climate change mitigation (2017, methodology): “Although similar evaluation methods can be applied to both benefit-cost and processbased models, cost-benefit models face additional and specific modelling issues which distinguish their evaluation needs (132).”
What if negative emission technologies fail at scale? Implications of the Paris Agreement for big emitting nations (2018, background): “They fail to sufficiently address social aspects of technology change (Ackerman et al., 2009), an issue of deep importance when considering social acceptability in futures with extensive BECCS deployment (Braun et al., 2017; Fuss et al., 2014; Gough & Vaughan, 2015).”