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The Damage Costs of Climate Change -- Towards More Comprehensive Calculations

journal contribution
posted on 2023-06-07, 23:59 authored by Richard TolRichard Tol
It is argued that estimating the damage costs of a certain benchmark climate change is not sufficient. What is needed are cost functions and confidence intervals. Although these are contained in the integrated models and their technical manuals, this paper brings them into the open in order to stimulate discussion. After briefly reviewing the benchmark climate change damage costs, region-specific cost functions are presented which distinguish tangible from intangible losses and the losses due to a changing climate from those due to a changed climate. Furthermore, cost functions are assumed to be quadratic, as an approximation of the unknown but presumably convex functions. Results from the damage module of the integrated climate economy model FUND are presented, Next, uncertainties are incorporated and expected damages are calculated. It is shown that because of convex loss functions and right-skewed uncertainties, the risk premium is substantial, calling for more action than analysis based on best-guess estimates. The final section explores some needs for further scientific research.

History

Publication status

  • Published

Journal

Environmental and Resource Economics

ISSN

0924-6460

Publisher

Springer

Issue

5

Page range

353-374

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-02-06

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