Climate Economics

Richard Tol (2014)

RichardTol_ClimateEconomics One of the first attempts at a textbook on Climate Economics. Probably the best overview of neoclassical climate economics in a single volume. For a critical non-neoclassical review, read  Chalmers & Shackley’s (2014) review of the book.

One point: as a neo-classicist, Tol has a deeply instilled ‘equilbrium view’ and brings this epistemic perspective to his view of how the ‘natural world’ works.  His is a view of climate change as a continuous secular process that amounts (‘merely’) to a x-degreeC-per-year change in temperature. What ‘equilibrium thinkers’ need to understand is that the Earth system is currently not in equilibrium; most of the mounting costs aren’t to do with the (more predictable) secular changes in average temperatures and precipitation: they are to do, rather, with the increased variability and (associated) decreased predictability of ‘weather’.  Note that I am not speaking here about the uncertainty to do with future (average) temperature trends.

I think this is important, because people trained in economics (and more especially finance) should at least have an strong intuition for the costs (‘premium’) associated with decreased predictability / increased variability – although to date little work has been done in tying this into climate change economics.

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