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Towards impact functions for stochastic climate change

journal contribution
posted on 2023-06-09, 00:27 authored by Francisco Estrada, Richard TolRichard Tol
Most functions of economic impact assume that climate change is smooth. We here propose impact functions that have stochastic climate change as an input. These functions are identical in shape and have similar parameters as do deterministic impact functions. The mean stochastic impacts are thus similar to deterministic impacts. Welfare effects are larger, and the stochasticity premium is larger than the risk premium. Results suggest that stochasticity is more important for past impacts than for future impacts. This outcome is partly caused by an underestimation of natural variability in the 21st century climate projections.

History

Publication status

  • Published

Journal

Climate Change Economics

ISSN

2010-0078

Publisher

World Scientific Publishing

Issue

4

Volume

6

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2016-04-01

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