DP7024 Uncertainty, Climate Change and the Global Economy

Author(s): Torsten Persson, David von Below
Publication Date: October 2008
Keyword(s): Climate-economy models, Global warming, Monte Carlo study
JEL(s): E17, O13, Q54
Programme Areas: International Macroeconomics, Public Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7024

The paper illustrates how one may assess our comprehensive uncertainty about the various relations in the entire chain from human activity to climate change. Using a modified version of the RICE model of the global economy and climate, we perform Monte Carlo simulations, where full sets of parameters in the model's most important equations are drawn randomly from pre-specified distributions, and present results in the forms of fan charts and histograms. Our results suggest that under a Business-As-Usual scenario, the median increase of global mean temperature in 2105 relative to 1900 will be around 4.5 °C. The 99 percent confidence interval ranges from 3.0 °C to 6.9 °C. Uncertainty about socio-economic drivers of climate change lie behind a non-trivial part of this uncertainty about global warming.