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Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting

Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting

Chapter:
(p.23) 1 Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting
Source:
The Economics of Climate Change
Author(s):
Martin L. Weitzman
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226479903.003.0002

Climate change is so complicated, involving so many different disciplines and viewpoints that a model can only address one or two facets of the problem. This chapter focuses on the economic implications of unusually large structural uncertainties surrounding climate change extremes and why aggressive emissions mitigation policies might be justified. Additive damages are appropriate for analyzing the economic impact of global warming in light of highly uncertain feedback mechanisms between green-house gases (GHG) accumulations and temperatures with possibly catastrophic results. With uncertain rates of time preference and discount rates approaching zero, these climate-change damage and uncertain response mechanisms lead to very large expected present disutility. The social willingness to pay to avoid potential catastrophically high temperatures in the future could be infinite, whereby society sacrifices all current consumption to prevent future warming.

Keywords:   additive damages, climate dynamics, climate change, emissions, mitigation policies, global warming, green-house gases

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