Common Tragedies

Thoughts on Environmental Economics

Choose Your Own (Climate) Adventure

Posted by Evan Herrnstadt on March 11, 2008

I found this link in my inbox this morning:

Today, Yale’s School of Forestry & Environmental Studies posted a new website developed by economics professor Robert Repetto. In a way that anybody can easily understand, it synthesizes the results of thousands of policy simulations from 25 economic models being used to predict the economic impacts of reducing U.S. carbon emissions. To try this new website, just click on http://www.climate.yale.edu/seeforyourself. This website identifies the seven key assumptions accounting for most of the differences in the models’ predictions. It shows that even under the most unfavorable assumptions regarding costs, the U.S. economy is predicted to continue growing robustly as carbon emissions are reduced. Under more favorable assumptions, the economy would even grow more rapidly if emissions are reduced than if they are allowed to continue to increase as in the past. Even better, this new website allows site visitors to decide how likely they think each of the seven key assumptions are, and on that basis see for themselves what economic impacts all the leading economic models would predict, if carbon emissions are reduced by specific percentages over the next two decades. If you visit this site, you can make your own assumptions about the key factors that will influence the costs of stopping climate change and see the results.

I think this meta-analysis is a really good idea for people who, like me, do not quite understand all the nuts and bolts of a climate model. It is valuable to go play around a bit and see precisely how the key economic and behavioral assumptions affect the economic impacts of climate change. However, in the case of someone who isn’t really in it for reasons of curiosity, I feel like the structure of the site will help confirm initial biases.

The instructions:

Choose any number between 0 and 1 representing the likelihood that the statement is true: (for example, 0 represents “no chance”, 1 represents “certainty”, 0.5 represents a 50 percent chance, 0.75 represents three chances out of four, etc.)

An example question:

How likely is it that national policies that make carbon fuels more expensive will stimulate technological innovation that raises energy efficiency or makes renewable energy alternatives less expensive?

This is a pretty standard induced innovation hypothesis. I think most people who have studied economics would agree that this is pretty likely. However, if you have someone who is vehemently anti-market (or for that matter, anti-carbon price), they might be likely to put in a small probability. Furthermore, what does it mean to the average user for the induced innovation hypothesis to hold with P = 0.75?

A nice counter to this point is that even under worst assumptions, the economy still grows at a solid, if not robust, 2.4% through 2030; however, I feel that there is potential for the general public to underestimate the tradeoffs of climate mitigation by making overly-optimistic assumptions.

Finally, I hope that the creators try to turn the concept of this site into some sort of survey. It would be valuable to see how the general public, economic experts, and other climate experts differ in their perceptions of various uncertainties.

H/T: Joe Aldy and Gus Speth.

Update: edit for clarity

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: