COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1009

The 'Dice' Model:
Background and Structure of a Dynamic Integrated Climate-Economy Model
of the Economics of Global Warming

William D. Nordhaus

February 1992

This study is designed to present the methodological and technical assumptions and the results behind the Dynamic Integrated model of Climate and the Economy (the DICE model). It is a model that attempts to use the tools of modern economics to determine an efficient strategy for coping with the threat of global warming. The fundamental premise behind this study is that societies should undertake environmental policies only when their benefits, broadly construed, exceed their costs and that the level of environmental control should be at that point where the incremental benefits of additional controls no longer exceed the incremental costs. In the area of global warming, this general strategy is easy to articulate and difficult to execute. The work embodied in this study lays out one approach -- the use of dynamic economic optimization -- to the construction of an efficient control strategy.

JE Classification: F01, Q25, Q28

Keywords: Air pollution, conservation, environment, climate