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High impact, low probability? An empirical analysis of risk in the economics of climate change.
- Source :
- Climatic Change; Oct2011, Vol. 108 Issue 3, p519-541, 23p, 3 Charts, 4 Graphs
- Publication Year :
- 2011
-
Abstract
- To what extent does economic analysis of climate change depend on low-probability, high-impact events? This question has received a great deal of attention lately, with the contention increasingly made that climate damage could be so large that societal willingness to pay to avoid extreme outcomes should overwhelm other seemingly important assumptions, notably on time preference. This paper provides an empirical examination of some key theoretical points, using a probabilistic integrated assessment model. New, fat-tailed distributions are inputted for key parameters representing climate sensitivity and economic costs. It is found that welfare estimates do strongly depend on tail risks, but for a set of plausible assumptions time preference can still matter. [ABSTRACT FROM AUTHOR]
- Subjects :
- ECONOMIC research
CLIMATE change
GREENHOUSE gas mitigation
GLOBAL warming
Subjects
Details
- Language :
- English
- ISSN :
- 01650009
- Volume :
- 108
- Issue :
- 3
- Database :
- Complementary Index
- Journal :
- Climatic Change
- Publication Type :
- Academic Journal
- Accession number :
- 65517894
- Full Text :
- https://doi.org/10.1007/s10584-010-9993-4