GHG Targets as Insurance Against Catastrophic Climate Damages

By Martin Weitzman. 2012

447 citations recorded by the source corpus.

A critical issue in climate-change economics is the specification of the so-called "damages function" and its interaction with the unknown uncertainty of catastrophic outcomes. This paper asks how much we might be misled by our economic assessment of climate change when we employ a conventional quadratic damages function and/or a thin-tailed probability distribution for extreme temperatures. The paper gives some numerical examples of the indirect value of various GHG concentration targets as insurance against catastrophic climate-change temperatures and damages. These numerical examples suggest that we might be underestimating considerably the welfare losses from uncertainty by using a quadratic damages function and/or a thin-tailed temperature distribution. In these examples, the primary reason for keeping GHG levels down is to insure against high-temperature catastrophic climate risks.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/dbc51614ada38a44ff36203fa1bf05d62736db22

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Citations in the corpus

Scientific Ambiguity and Climate Policy (2013, background): “A number of scholars, including Weitzman (2012), consider predicted damages of 6.5 % of GDP given 5 ◦C warming to be remarkably low, and suggest that the damage function should be revisited (see also Ackerman et al. 2010).”
Cumulative carbon emissions and economic policy: In search of general principles (2019, background): “There is little empirical evidence that is directly relevant (Pindyck, 2013) and it has been argued that costs have been systematically underestimated in the economic literature, at least at high levels of warming (Weitzman, 2009, 2012), if not indeed at any level (Stern, 2013).”
Fat Tails, Thin Tails, and Climate Change Policy (2010, unknown): “There is fat-tailed uncertainty of the kind that Weitzman (2009a, 2010) has focused on and there are fat-tailed damage or utility functions, such as the CRRA utility function discussed above, for which marginal 4The index of relative risk aversion is defined as IRRA ¼ –CU$(C)/U0(C), which for the…”
A Meta-Analysis of the Total Economic Impact of Climate Change (2022, background): “Ackerman and Stanton (2012), Bosetti et al. (2007), Gunasekera et al. (2008), Manne and Richels (2005), Tol (2013), Weitzman (2012) do not present new estimates of the total impact of climate change, focus instead on the social cost of carbon.”
Pricing Uncertainty Induced by Climate Change (2020, unknown): “…thresholds or sharp convexities in the damage function and found no evidence from the damage estimates of a sharp discontinuity or high convexity...” Weitzman (2012) argues for a steeper degradation in the damages and motivates his construction of an alternative damage function on the basis of…”
Coping With Collapse: A Stock-Flow Consistent Monetary Macrodynamics of Global Warming (2018, background): “Fourth, the High damage K scenario takes advantage of Weitzman (2012) by introducing an alternative and more convex functional form of climate damages.”
The climate beta (2018, background): “…and Asheim (2012) in specifying a normal distribution for α3 that spans existing suggestions, in that at three standard deviations above the mean total damages approximate Weitzman (2012), while at three standard deviations below the mean they approximately reduce to standard quadratic damages.”
Climate Change, Financial Stability and Monetary Policy (2018, unknown): “(5) has been proposed by Weitzman (2012); η 1 , η 2 , η 3 ≥ 0.”
Targets for global climate policy: an overview (2013, background): “In the second approach to catastrophic risk, a premium is added to the impact of climate change (Nordhaus, 2008; Stern et al., 2006), or highly non-linear term to the impact function (Manne et al., 1995; Weitzman, 2012).”
A stock-flow-fund ecological macroeconomic model (2015, background): “(55) has been suggested by Weitzman (2012) who argues that the quadratic forms of damage functions used in the traditional literature of integrated assessmentmodels do not adequately capture high-temperature damages.”
Climate economics support for the UN climate targets (2020, unknown): “In our central model, we do not change the functional form of the damage function, as in Weitzman 12,50 or Glanemann et al. 51 , who apply the damage function of Burke et al. 47 , but rather update how damage estimates are combined to calibrate the standard DICE damage function.”
Instrument choice and stranded assets in the transition to clean capital (2017, methodology): “Here, we adopt a cost-effectiveness approach (Manne and Richels, 1992; Ambrosi et al., 2003; Weitzman, 2012) and analyze policies that allow maintaining atmospheric concentration mt below a given ceiling m̄: mt ≤ m̄(22) Instrument Choice and Stranded Assets in the Transition to Clean Capital…”
A retrospective analysis of benefits and impacts of U.S. renewable portfolio standards (2016, background): “24 Research has sought to estimate the magnitude and timing of climate-change impacts, damages, and associated costs (IPCC 2014a; IPCC 2014b; IWG 2010; IWG 2015; Melillo et al. 2014; Weitzman 2012).”
The problem of the commons: still unsettled after 100 years. (2010, unknown): “…fat-tailed structural uncertainty will outweigh the economic effects of temporal discounting, because (under specific conditions regarding the structure of uncertainty and preferences), there will be an infinitely large expected loss from low-probability, high-consequence events (Weitzman 2010a).”