TY  - JOUR
AU  - Cai,Yongyang
AU  - Judd,Kenneth L.
AU  - Lontzek,Thomas S.
TI  - The Social Cost of Stochastic and Irreversible Climate Change
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18704
PY  - 2013
Y2  - January 2013
UR  - http://www.nber.org/papers/w18704
L1  - http://www.nber.org/papers/w18704.pdf
N1  - Author contact info:
Yongyang Cai
Hoover Institution
Stanford University
Stanford, CA 94305
E-Mail: yycai@stanford.edu

Kenneth L. Judd
Hoover Institution
Stanford University
Stanford, CA  94305-6010
Tel: 650/723-5866
Fax: 650/723-1687
E-Mail: kennethjudd@mac.com

Thomas Lontzek
University of Zurich
Moussonstrasse 15, 8044 Zurich
E-Mail: Thomas.Lontzek@Business.uzh.ch
AB  - There is great uncertainty about the impact of anthropogenic carbon on future economic wellbeing. We use DSICE, a DSGE extension of the DICE2007 model of William Nordhaus, which incorporates beliefs about the uncertain economic impact of possible climate tipping events and uses empirically plausible parameterizations of Epstein-Zin preferences to represent attitudes towards risk. We find that the uncertainty associated with anthropogenic climate change imply carbon taxes much higher than implied by deterministic models. This analysis indicates that the absence of uncertainty in DICE2007 and similar models may result in substantial understatement of the potential benefits of policies to reduce GHG emissions.
ER  -