The Comparative Impact of Integrated Assessment Models’ Structures on Optimal Mitigation Policies

Abstract

This paper aims at providing a consistent framework to appraise alternative modeling choices that have driven the so-called "when flexibility" controversy since the early 1990s dealing with the optimal timing of mitigation efforts and the Social Cost of Carbon (SCC).The literature has emphasized the critical impact of modeling structures on the optimal climate policy. But, to our knowledge, there has been no contribution trying to estimate the comparative impact of modeling structures within a unified framework. In this paper, we use the Integrated Assessment Model (IAM) RESPONSE to bridge this gap and investigate the structural modeling drivers of differences in climate policy recommendations.RESPONSE is both sufficiently compact to be easily tractable and detailed enough to capture a wide array of modeling choices. Here, we restrict the analysis to the following emblematic modeling choices: the forms of the damage function (quadratic vs. sigmoid) and the abatement cost (with or without inertia), the treatment of uncertainty, and the decision framework (one-shot vs. sequential).We define an original methodology based on an equivalence criterion to carry out a sensitivity analysis over modeling structures in order to estimate their relative impact on two output variables: the optimal SCC and abatement trajectories. This allows us to exhibit three key findings: (i) IAMs with a quadratic damage function are insensitive to changes of other features of the modeling structure, (ii) IAMs involving a non-convex damage function entail contrasting climate strategies, (iii) Precautionary behaviours can only come up in IAMs with non-convexities in damages.

Climate change and population: An assessment of mortality due to health impacts

“…To produce our estimates, we built on the RESPONSE model (Dumas et al, 2012;Pottier et al, 2015). RESPONSE belongs to the compact IAMs family 2 , it considers a simple representation of the economy, where the production of a single good is derived from labour and capital inputs.…”

Modeling myths: OnDICEand dynamic realism in integrated assessment models of climate change mitigation

“…Its simplicity also makes DICE (or variants thereof [Tsigaris & Wood, 2016]) appealing for teaching, widely used for introducing climate change to economics courses and beyond. DICE also served as inspiration for new simple IAMs (Pottier et al, 2015; van der Ploeg & Rezai, 2019).…”

Social Cost of Carbon Under Stochastic Tipping Points

“…Our article also contributes to understanding the eect of dierent representations for climate damages on optimal policy. Since climate damages are the least-grounded aspect of IAMs (Diaz and Moore, 2017;Revesz et al, 2014;Howard, 2014) and have a strong impact on the SCC (as large as discounting (van den Bijgaart et al, 2016)), it is essential to build rigorous methodologies that compare how dierent representations of damages aect the SCC (Pottier et al, 2015;Guivarch and Pottier, 2018). Here, we compare indeed two dierent settings to represent a tipping point: one where tipping points are represented as a truly stochastic event, one where tipping points are represented as a mere increase in the damage function, so that it reects expected damages.…”