COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1839 Integrated Economic and Climate Modeling William Nordhaus December 2011 This survey examines the history and current practice in integrated
assessment models (IAMs) of the economics of climate change. It begins with a review of
the emerging problem of climate change. The next section provides a brief sketch of the
rise of IAMs in the 1970s and beyond. The subsequent section is an extended exposition of
one IAM, the DICE/RICE family of models. The purpose of this description is to provide
readers an example of how such a model is developed and what the major components are. The
final section discusses major important open questions that continue to occupy IAM
modelers. These involve issues such as the discount rate, uncertainty, the social cost of
carbon, the potential for catastrophic climate change, algorithms, and fat-tailed
distributions. These issues are ones that pose both deep intellectual challenges as well
as important policy implications for climate change and climate-change policy. |
