Economics of tipping the climate dominoes

Abstract

Greenhouse gas emissions can trigger irreversible regime shifts in the climate system, known as tipping points. Multiple tipping points affect each other's probability of occurrence, potentially causing a "domino effect". We analyze climate policy in the presence of a potential domino effect. We incorporate three different tipping points occurring at unknown thresholds into an integrated climate-economy model. The optimal emission policy considers all possible thresholds and the resulting interactions between tipping points, economic activity, and policy responses into the indefinite future. We quantify the cost of delaying optimal emission controls in the presence of uncertain tipping points and also the benefit of detecting when individual tipping points have been triggered. We show that the presence of these tipping points nearly doubles today's optimal carbon tax and reduces peak warming along the optimal path by approximately 1 degree Celsius. The presence of these tipping points increases the cost of delaying optimal policy until mid-century by nearly 150%.The threat of climate tipping points plays a major role in calls for aggressive emission reductions to limit warming to 2 degrees Celsius 3-6 . The scientific literature is particularly concerned with the possibility of a "domino effect" from multiple interacting tipping points [7][8][9][10][11][12] . For instance, reducing the effectiveness of carbon sinks amplifies future warming, which in turn makes further tipping points more likely. Nearly all of the preceding quantitative economic studies analyze opti-

The simple arithmetic of carbon pricing and stranded assets

“…In recent estimates of the non-climaterelated health benefits of abandoning fossil fuels (e.g. Parry et al 2014;Thompson et al 2014;West et al 2013;Ščasný et al 2015), the effects of uncertainty about the steepness of climate damages (Crost and Traeger 2014) and the potential of multiple abrupt disruptions in the climate system (Cai et al 2016;Lemoine and Traeger 2016) provide ample reasons for raising the carbon price.…”

Managing Climate Change Under Uncertainty: Recursive Integrated Assessment at an Inflection Point

“…The policy implications of tipping points that affect the physical climate system vary strongly over plausible consequences of tipping and over assumptions about our ability to learn about tipping points, either prior to triggering them (Lemoine and Traeger, 2014) or after having triggering them (Lemoine and Traeger, 2016b). These policy implications also depend on whether deploying "geoengineering" technologies can mitigate the consequences of tipping (Heutel et al, 2016).…”

“…Other attitudes towards uncertainty matter less than does the adoption of recursive utility, probably because they do not affect the consumption discount rate as directly. In particular, a preference for robustness to alternative damage functions (Rudik, 2016) and aversion to ambiguity about a potential tipping point (Lemoine and Traeger, 2016a) each affect policy less than does the adoption of recursive utility.…”

“…In this case (which roughly matches nearly all of the literature to date), we have what is called a conjugate prior and thus know that the 9 Lemoine and Traeger (2014) use the value function to tease apart the different channels through which potential tipping points affect policy. Lemoine and Traeger (2016a) quantify the channels through which aversion to ambiguity about a tipping point's threshold affects policy. Heutel et al (2016) tease apart the channels through which tipping points and geoengineering controls interact.…”

Frontiers of Climate Change Economics

“…van der Ploeg 2016a). Lemoine and Traeger (2016) allow for interdependencies of different catastrophes and show that the optimal carbon price almost doubles (from 6 to 11 US$ per tonne CO 2 ). Cai et al (2016) even find an almost eightfold increase in the optimal carbon price (from 15 to 116 US$ per tonne CO 2 ), which lowers the probability of crossing one or more tipping points from 46 to 11%.…”