The Dynamic Integrated Climate-Economy model, referred to as the DICE model or Dice model, is a neoclassical integrated assessment model developed by 2018 Nobel Laureate William Nordhaus that integrates in the neoclassical economics, carbon cycle, climate science, and estimated impacts allowing the weighing of subjectively guessed costs and subjectively guessed benefits of taking steps to slow climate change. Nordhaus also developed the RICE model (Regional Integrated Climate-Economy model), a variant of the DICE model that was updated and developed alongside the DICE model. [1] [2] [3] [4] Researchers who collaborated with Nordhaus to develop the model include David Popp, Zili Yang, and Joseph Boyer. [2]
The DICE model is one of the three main integrated assessment models used by the United States Environmental Protection Agency, and it provides estimates intermediate between the other two models. [4] [5]
According to a summary of the DICE and RICE models prepared by Stephen Newbold, [1] the earliest precursor to DICE was a linear programming model of energy supply and demand in two 1977 papers of William Nordhaus. [6] [7] Although dynamic (in that it considered the changing levels of supply of fuel based on supply and demand and the consequence impact on carbon dioxide emissions) the model did not attempt to measure the economic impact of climate change. [1] A 1991 paper by Nordhaus developed a steady-state model of both the economy and climate, coming quite close to the DICE model. [1] [8]
The model appears to have first been proposed by economist William Nordhaus in a discussion paper for the Cowles Foundation in February 1992. [9] He also wrote a brief note outlining the main ideas in an article for Science in November 1992. [10] A subsequent revised model was published in Resource and Energy Economics in 1993. [11] [12]
Nordhaus published an improved version of the model in the October 1994 book Managing the Global Commons: The Economics of Climate Change, [13] with the first chapter as well as an appendix containing a computer program both freely available online. [14] [15] Marian Radetzki reviewed the book for The Energy Journal . [16]
In 1996, Nordhaus and Zili Yang published an article titled A regional dynamic general-equilibrium model of alternative climate-change strategies at The American Economic Review, established the RICE (Regional Integrated model of Climate and the Economy) model. [17]
In 1998, Nordhaus published a revised version of the DICE model in multiple papers, one of which was coauthored with Joseph Boyer in order to understand the effects of the proposed Kyoto Protocol. [18] [19]
In 1999, Nordhaus published computer programs and spreadsheets implementing a revised version of the DICE model as well as a variant called the RICE model (RICE stands for Regional Integrated Climate-Economics, signifying that the modeling of economics and climate are being done only for a particular region rather than the whole world). [20] [21]
In 2000, Nordhaus and Boyer co-authored a book published by MIT Press titled Warming the World: Economic Models of Global Warming with a detailed description of the updated DICE and RICE models. [22]
In 2001, Nordhaus published revised spreadsheets for the RICE model. [23]
In November 2006, Nordhaus published a new version of the DICE model with updated data, and used it to review the Stern Review. [2] [24] [25]
In 2010, updated RICE and DICE models were published, and the new RICE model was explained by Nordhaus in an article for the Proceedings of the National Academy of Sciences (US). [26] [27]
In 2013, the book The Climate Casino by Nordhaus, with updated discussion of the DICE and RICE models and the broader policy implications, was published by Yale University Press. [28] A background on the latest version of the models as used in the book was published on Nordhaus' website. [29] [30]
In 2020, modelers from the Potsdam Institute for Climate Impact Research (PIK) reported a rerun of the DICE model using updated climate and economic information and found that the economically optimal climate goal was now less than 2.0 °C of global warming — and not the 3.5 °C that Nordhaus had originally calculated. [31] [32] The PIK team employed current understandings of the climate system and more modern social discount rates. [33] This new result therefore broadly supports the Paris Agreement goal of holding global warming to "well below 2.0 °C". Their revised AMPL code and data are available under open licenses. [34]
According to the original formulation of DICE, staying below the 2 °C as agreed by the Paris agreement would cost more in mitigation investments than would be saved in damage from climate change. A 2020 paper by Glanemann, Willner and Levermann, which used an updated damage function, revised this conclusion, showing that a warming of around 2 °C would be "optimal", depending on the climate sensitivity to greenhouse gases. [35]
The DICE model is an example of a neoclassical energy-economy-environment model. The central assumption of this type of model is that market externalities create costs not captured in the price system and that government must intervene to assure that these costs are included in the supply price of the good creating the externality. Innovation is assumed to be exogenous; as such, the model is a pre-ITC model (it does not yet include Induced Technological Change). [36] An extension of the model (DICE-PACE) that does include induced technological change, has strongly different outcomes: the optimal path would be to invest strongly early on in mitigation technology. [37] In contrast to non-equilibrium models, investment in low carbon technology is assumed to crowd-out investments in other parts of the economy, leading to a loss of GDP. [36]
A number of variants of the DICE model have been published by researchers working separately from Nordhaus. [38] [39] The model has been criticised by Steve Keen for a priori assuming that 87% of the economy will be unaffected by climate change, misrepresenting contributions from natural scientists on tipping points, and selecting a high discount rate. [40]
The DICE and RICE models have received considerable attention from others studying the economic impact of climate change. It is one of the models used by the Environmental Protection Agency for estimating the social cost of carbon. [4] [5] Stephen Newbold of the Environmental Protection Agency in the United States reviewed the models in 2010. [1]
The Basque Centre for Climate Change, in an October 2009 review of integrated assessment models for climate change, discussed the DICE model in detail. [41]
A report from The Heritage Foundation, a conservative and climate change denying think tank in the United States, called the DICE model "flawed beyond use for policymaking" on account of its extreme sensitivity to initial assumptions. [5] Similar criticisms, including criticisms of the specific choice of discount rates chosen in the model, have been made by others. [42] [43] Many of these criticisms were addressed in the 2020 rework listed above.
Steve Keen is an Australian economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific, and empirically unsupported.
Nicholas Herbert Stern, Baron Stern of Brentford, is a British economist, banker, and academic. He is the IG Patel Professor of Economics and Government and Chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics (LSE), and 2010 Professor of Collège de France. He was President of the British Academy from 2013 to 2017, and was elected Fellow of the Royal Society in 2014.
The Special Report on Emissions Scenarios (SRES) is a report by the Intergovernmental Panel on Climate Change (IPCC) that was published in 2000. The greenhouse gas emissions scenarios described in the Report have been used to make projections of possible future climate change. The SRES scenarios, as they are often called, were used in the IPCC Third Assessment Report (TAR), published in 2001, and in the IPCC Fourth Assessment Report (AR4), published in 2007. The SRES scenarios were designed to improve upon some aspects of the IS92 scenarios, which had been used in the earlier IPCC Second Assessment Report of 1995. The SRES scenarios are "baseline" scenarios, which means that they do not take into account any current or future measures to limit greenhouse gas (GHG) emissions.
The politics of climate change results from different perspectives on how to respond to climate change. Global warming is driven largely by the emissions of greenhouse gases due to human economic activity, especially the burning of fossil fuels, certain industries like cement and steel production, and land use for agriculture and forestry. Since the Industrial Revolution, fossil fuels have provided the main source of energy for economic and technological development. The centrality of fossil fuels and other carbon-intensive industries has resulted in much resistance to climate friendly policy, despite widespread scientific consensus that such policy is necessary.
An economic analysis of climate change uses economic tools and models to calculate the magnitude and distribution of damages caused by climate change. It can also give guidance for the best policies for mitigation and adaptation to climate change from an economic perspective. There are many economic models and frameworks. For example, in a cost–benefit analysis, the trade offs between climate change impacts, adaptation, and mitigation are made explicit. For this kind of analysis, integrated assessment models (IAMs) are useful. Those models link main features of society and economy with the biosphere and atmosphere into one modelling framework. The total economic impacts from climate change are difficult to estimate. In general, they increase the more the global surface temperature increases.
William Dawbney Nordhaus is an American economist. He was a Sterling Professor of Economics at Yale University, best known for his work in economic modeling and climate change, and a co-recipient of the 2018 Nobel Memorial Prize in Economic Sciences. Nordhaus received the prize "for integrating climate change into long-run macroeconomic analysis".
The Stern Review on the Economics of Climate Change is a 700-page report released for the Government of the United Kingdom on 30 October 2006 by economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics (LSE) and also chair of the Centre for Climate Change Economics and Policy (CCCEP) at Leeds University and LSE. The report discusses the effect of global warming on the world economy. Although not the first economic report on climate change, it is significant as the largest and most widely known and discussed report of its kind.
Robert O. Mendelsohn is an American environmental economist. He is currently the Edwin Weyerhaeuser Davis Professor of the School of Forestry and Environmental Studies at Yale University, Professor of Economics in Economics Department at Yale University and Professor in the School of Management at Yale University. Mendelsohn is a major figure in the economics of global warming, being for example a contributor to the first Copenhagen Consensus report. Mendelsohn received a BA in economics from Harvard University in 1973 and obtained his Ph.D. in economics from Yale University in 1978.
Richard S. J. Tol is a professor of economics at the University of Sussex. He is also professor of the economics of climate change at the Vrije Universiteit Amsterdam. He is a member of the Academia Europaea.
The social cost of carbon (SCC) is the marginal cost of the impacts caused by emitting one extra tonne of carbon emissions at any point in time. The purpose of putting a price on a tonne of emitted CO2 is to aid policymakers or other legislators in evaluating whether a policy designed to curb climate change is justified. The social cost of carbon is a calculation focused on taking corrective measures on climate change which can be deemed a form of market failure. The only governments which use the SCC are in North America. The Intergovernmental Panel on Climate Change suggested that a carbon price of $100 per tonne of CO2 could reduce global GHG emissions by at least half the 2019 level by 2030.
Carbon pricing is a method for governments to mitigate climate change, in which a monetary cost is applied to greenhouse gas emissions. This is done to encourage polluters to reduce fossil fuel combustion, the main driver of climate change. A carbon price usually takes the form of a carbon tax, or an emissions trading scheme (ETS) that requires firms to purchase allowances to emit. The method is widely agreed to be an efficient policy for reducing greenhouse gas emissions. Carbon pricing seeks to address the economic problem that emissions of CO2 and other greenhouse gases are a negative externality – a detrimental product that is not charged for by any market.
Integrated assessment modelling (IAM) or integrated modelling (IM) is a term used for a type of scientific modelling that tries to link main features of society and economy with the biosphere and atmosphere into one modelling framework. The goal of integrated assessment modelling is to accommodate informed policy-making, usually in the context of climate change though also in other areas of human and social development. While the detail and extent of integrated disciplines varies strongly per model, all climatic integrated assessment modelling includes economic processes as well as processes producing greenhouse gases. Other integrated assessment models also integrate other aspects of human development such as education, health, infrastructure, and governance.
Green growth is a concept in economic theory and policymaking used to describe paths of economic growth that are environmentally sustainable. It is based on the understanding that as long as economic growth remains a predominant goal, a decoupling of economic growth from resource use and adverse environmental impacts is required. As such, green growth is closely related to the concepts of green economy and low-carbon or sustainable development. A main driver for green growth is the transition towards sustainable energy systems. Advocates of green growth policies argue that well-implemented green policies can create opportunities for employment in sectors such as renewable energy, green agriculture, or sustainable forestry.
The economics of climate change mitigation is a contentious part of climate change mitigation – action aimed to limit the dangerous socio-economic and environmental consequences of climate change.
The Kyoto Protocol was an international treaty which extended the 1992 United Nations Framework Convention on Climate Change.
Climate change is a critical issue in Bangladesh. as the country is one of the most vulnerable to the effects of climate change. In the 2020 edition of Germanwatch's Climate Risk Index, it ranked seventh in the list of countries most affected by climate calamities during the period 1999–2018. Bangladesh's vulnerability to the effects of climate change is due to a combination of geographical factors, such as its flat, low-lying, and delta-exposed topography. and socio-economic factors, including its high population density, levels of poverty, and dependence on agriculture. The impacts and potential threats include sea level rise, temperature rise, food crisis, droughts, floods, and cyclones.
The Integrated Global System Model (IGSM) is an Integrated Assessment Model (IAM) developed by the Massachusetts Institute of Technology (MIT) Joint Program on the Science and Policy of Global Change. The IGSM couples the MIT Earth System Model (MESM), an Earth system model of intermediate complexity, to the Economic Projection and Policy Analysis (EPPA), a human activity model that represents the world's economy. It has been used to understand the interactions between humans and the global climate system.
The World Resources Institute (WRI) is a global research non-profit organization established in 1982 with funding from the MacArthur Foundation under the leadership of James Gustave Speth. Subsequent presidents include Jonathan Lash (1993–2011), Andrew D. Steer (2012–2021) and current president Ani Dasgupta (2021–present).
The Economists' Statement on Climate Change was published in 1997, prior to the Kyoto Protocol negotiated that same year, to promote market-based solutions to climate change. It was signed by more than 2,600 economists, including 19 Nobel Prize laureates, and remains the largest public statement in the history of the economics profession.
Gernot Wagner is an Austro-American climate economist at Columbia Business School, where he is a tenured full professor. He holds an AB and a PhD in political economy and government from Harvard University, as well as an MA in economics from Stanford University. A founding co-director of Harvard's Solar Geoengineering Research Program (2017-2019) he joined the faculty of New York University in 2019, moving to Columbia University in 2022. Wagner writes a monthly column for Project Syndicate, and is the co-author, with Martin L. Weitzman, of Climate Shock, a Top 15 Financial Times-McKinsey Business Book of the Year 2015. He won the "Austrian of the Year" award in 2022, awarded by Austrian daily Die Presse.
{{cite journal}}
: Cite journal requires |journal=
(help){{cite journal}}
: Cite journal requires |journal=
(help)