The Aggregation Dilemma in Climate Change Policy Evaluation

Konferenzbeitrag

The results in this paper show that a policy maker who ignores regional data and instead relies on aggregated integrated assessment models will strongly underestimate the carbon price and thus the required climate policy. Using a stylized theoretical model we show that, under the mild and widely-accepted assumptions of asymmetric climate change impacts and declining marginal utility, an Aggregation Dilemma may arise that dwarfs most other policy-relevant aspects in the climate change cost-benefit analysis. Estimates based on the RICE model Nordhaus (2000) suggest that aggregation leads to around 26% higher total world emissions than those from a regional model. The backstop energy use would be zero in aggregated versions of the model, while it is roughly 1.3% of Gross World Product in the regionally-disaggregated models. Though the policy recommendations from fully aggregated models like the DICE model are always used as a benchmark for policy making, the results here suggest that this should be done with the reservations raised by the Aggregation Dilemma in mind.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Environmental Economics IV ; No. D13-V3

Classification and Topics

• Classification: Wirtschaft ; Climate; Natural Disasters and Their Management; Global Warming ; Environmental Economics: Government Policy ; Environmental Economics: General

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schumacher, Ingmar
• Event: Veröffentlichung
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/113129
• Last update: 10.03.2025, 11:45 AM CET