Lord Stern Proposes an Alternate Model of the Economic Cost of Climate Change

A new academic paper by Nicholas Stern and Simon Dietz critques the widely-used Dynamic Integrated model of Climate and the Economy (DICE), developed by William Nordhaus in the 1990’s, and updated in 2013. In a summary from the London School of Economics, Lord Stern states: “I hope our paper will prompt other economists to strive for much better models which will help policy-makers and the public to recognise the immensity of the potential risks of unmanaged climate change.” By modifying assumptions – for example, using a range of temperatures from 1.5C to 6C for climate senstivity, rather than the single 3C level of the DICE model – Stern and Dietz arrive at a level of $200 per tonne for the cost of carbon – astonishingly higher than $40 – $50 per tonne cost that the DICE model would produce. (The carbon tax in British Columbia grew from $10 per tonne at its inception in 2008, to the current level of $30 per tonne of CO2, since July 2012. )

London School of Economics press release is at http://www.lse.ac.uk/GranthamInstitute/news/dietz_stern_june2014/ . A working paper version of the article , Stern and Dietz (2014) Endogenous growth, convexity of damages and climate risk: how Nordhaus’ framework supports deep cuts in carbon emissions, is available from a link at http://www.lse.ac.uk/GranthamInstitute/publication/endogenous-growth-convexity-of-damages-and-climate-risk-how-nordhaus-framework-supports-deep-cuts-in-carbon-emission/.
“We’re massively underestimating climate costs, experts warn” (June 16) at Grist at http://grist.org/news/were-massively-underestimating-climate-costs-experts-warn/

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