Warming the World: Economic Models of Global Warming

William D. Nordhaus and Joseph Boyer
The MIT Press, 2000

Warming the World: Economic Models of Global Warming
Click to enlarge

Humans are risking the health of the natural environment through a myriad of interventions, including the atmospheric emission of trace gases such as carbon dioxide, the use of ozone-depleting chemicals, the engineering of massive land-use changes, and the destruction of the habitats of many species. It is imperative that we learn to protect our common geophysical and biological resources. Although scientists have studied greenhouse warming for decades, it is only recently that society has begun to consider the economic, political, and institutional aspects of environ-mental intervention. These considerations raise formidable challenges involving data modeling, uncertainty, international coordination, and institutional design.

Attempts to deal with complex scientific and economic issues have increasingly involved the use of models to help analysts and decision makers understand likely future outcomes as well as the implications of alternative policies. This book presents in detail a pair of models of the economics of climate change. The models, called RICE-99 (for the Regional Dynamic Integrated model of Climate and the Economy) and DICE-99 (for the Dynamic Integrated model of Climate and the Economy), build on the authors' earlier work, particularly their RICE and DICE models of the early 1990's. These newer models can help policymakers design better economic and environmental policies.

William D. Nordhaus is the A. Whitney Griswold Professor of Economics at Yale University. He is the author of Managing the Global Commons (MIT Press, 1994). Joseph Boyer is an Associate in Research at Yale University.

*  *  *  *  *

Preface

Dealing with complex scientific and economic issues has increasingly involved developing scientific and economic models that help analysts and decision makers understand likely future outcomes as well as the implications of alternative policies. This book presents the details of a pair of integrated-assessment models of the economics of climate change. The models, called RICE-99 (for the Regional Dynamic Integrated model of Climate and the Economy) and DICE-99 (for the Dynamic Integrated model of Climate and the Economy), build upon earlier work by Nordhaus and collaborators, particularly the DICE and RICE models constructed in the early 1990s. The purpose of this book is to lay out the logic and details of RICE-99 and DICE-99. Like an anatomy class, this description highlights internal structure of the models and the ways different segments are connected.

The book is organized into two parts. The first part describes RICE-99 and its globally aggregated companion, DICE-99. This part contains an introduction (chapter 1) and a brief description of RICE-99 (chapter2) that includes all the model equations. The details of the derivation of these equations and their parameterization are presented in chapters 3 and 4. Chapters 1 through 4 present RICE-99, leaving explicit discussion of DICE-99 to chapter 5. Chapter 6 explains how the models are solved. Part 11 presents the major results of RICE-99 and applies it to the questions surrounding climate change. The appendixes provide a summary listing of the equations, a variable list, and the programs for the RICE-99 and DICE-99 models. The models and spreadsheets are also available on the Web.

Those interested in this exciting field will recognize that this book builds on earlier work of the authors and of many others. Although it bears the names of two authors, the intellectual inspiration and contribution of many should be recognized. Among those we thank for contributing directly or indirectly are Jesse Ausubel, Howard Gruenspecht, Henry Jacoby, Dale Jorgenson, Charles Kolstad, Alan Manne, Robert Mendelsohn, Neboisa Nakicenovic, John Reilly, Richard Richels, Thomas Schelling, Richard Schmalensee, Stephen Schneider, Leo Schrattenholzer, Robert Stavins, Ferenc Toth, Karl Turekian, Paul Waggoner, John Weyant, Zili Yang, and Gary Yohe. Megan McCarthy and Ben Gillen provided valuable research assistance. This research was supported by the National Science Foundation and the Department of Energy. None of these is responsible for the errors, opinions, or flights of fancy in this work.