GHG T argets as I nsurance A gainst C atastrophic C limate D amages
Abstract
The climate system is an angry beast and we are poking it with sticks † . A critical issue in climate change economics is the specification of the so‐called “damages function” and its interaction with the unknown uncertainty of catastrophic outcomes. This paper asks how much we might be misled by our economic assessment of climate change when we employ a conventional quadratic damages function and/or a thin‐tailed probability distribution for extreme temperatures. The paper gives some numerical examples of the indirect value of various greenhouse gas (GHG) concentration targets as insurance against catastrophic climate change temperatures and damages. These numerical exercises suggest that we might be underestimating considerably the welfare losses from uncertainty by using a quadratic damages function and/or a thin‐tailed temperature distribution. In these examples, the primary reason for keeping GHG levels down is to insure against high‐temperature catastrophic climate risks.
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The respondents' answers are consistent with the arguments of Weitzman (2012) and Barro (2013) that climate change corresponds to disaster risk.
“Moreover, their answers are consistent with the arguments of Weitzman (2012) and Barro (2013) that climate change corresponds to disaster risk.”
From The Importance of Climate Risks for Institutional Investors (2020) · cites this paper as Weitzman (2012)
Cites
Irreversible climate change due to carbon dioxide emissions
Solomon, S., Plattner, G.-K., Knutti, R., & Friedlingstein, P. (2009) · Proceedings of the National Academy of Sciences · doi:10.1073/pnas.0812721106 · Cited by 3,217 · see citing works
On Modeling and Interpreting the Economics of Catastrophic Climate Change
Weitzman, M. L. (2009) · Review of Economics and Statistics · doi:10.1162/rest.91.1.1 · Cited by 1,791 · see citing works
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The Importance of Climate Risks for Institutional Investors
Krueger, P., Sautner, Z., & Starks, L. T. (2020) · The Review of Financial Studies · doi:10.1093/rfs/hhz137 · Cited by 3,034 · see citing works
‘Climate value at risk’ of global financial assets
Dietz, S., Bowen, A., Dixon, C., & Gradwell, P. (2016) · Nature Climate Change · doi:10.1038/nclimate2972 · Cited by 694 · see citing works
Betting on the best case: higher end warming is underrepresented in research
Jehn, F. U., Schneider, M., Wang, J. R., Kemp, L., & Breuer, L. (2021) · Environmental Research Letters · doi:10.1088/1748-9326/ac13ef · Cited by 27 · see citing works
- Authors
- WEITZMAN, M. L.
- Affiliations
- Harvard University (US)
- Corresponding author
- WEITZMAN, MARTIN L.
- Venue
- Journal of Public Economic Theory
- Publisher
- Wiley
- Published
- 2012-03
- Volume
- 14
- Issue
- 2
- Pages
- 221-244
- ISSN
- 1097-3923 (ISSN-L)
- 1467-9779
- OpenAlex
- W3122847977
- Cited by
- 373
- References
- 2
- Citations by year
- 2026: 23 · 2025: 19 · 2024: 23 · 2023: 18 · 2022: 29 · 2021: 28 · 2020: 22 · 2019: 67 · 2018: 21 · 2017: 19 · 2016: 18 · 2015: 27 · 2014: 17 · 2013: 18 · 2012: 13
- FWCI
- 57.41
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Journal of Public Economic Theory (publishedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Physical Sciences › Environmental Science › Global and Planetary Change › Climate Change and Geoengineering
- Physical Sciences › Environmental Science › Global and Planetary Change › Climate variability and models
- Keywords
- catastrophic climate change, climate change economics
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