Author(s): Ackerman, F., E. A. Stanton, R. Bueno
In: Ackerman, F., E. A. Stanton, R. Bueno (2010). Fat tails, exponents, extreme uncertainty: Simulating catastrophe in DICE. Ecological Economics, 69(8): 1657-1665.
Type: Journal article
Link to SEI author(s):
Fat Tails, Exponents, Extreme Uncertainty: Simulating Catastrophe in DICE
The problem of low-probability, catastrophic risk is increasingly central to discussion of climate science and policy, but integrated assessment models (IAMs) in climate economics rarely incorporate this possibility.
What would it take to change this? We explore the question using DICE, a well-known IAM, examining the implications of a fat-tailed probability distribution for the climate sensitivity parameter, a focus of recent work by Martin Weitzman, and the shape of the damage function, one of the issues raised by the Stern Review.
An earlier version of this article appeared as SEI Working Paper WP-US-0901, February/May 2009.
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