At 11:49 24/05/2002 -0500, Jim wrote:
>Additionally, Lomborg's footnote #2610 reads:
>"One should not put too much faith into all these digits, given the
>numerous assumptions and approximations--it would be more correct to
>say about $5 trillion.  However, the important point is here to
>compare the outcome with other scenarios, in which case the relative
>costs are much more robust" (p. 426).
>
>Maybe I'm being dense, but I'm still having a bit of trouble seeing
>the point to Schneider's criticism here: Lomborg's (actually
>Nordhaus's and Boyer's) $5 trillion figure is simply a baseline cost
>estimate given present Y2000 conditions of taking no action for
>purposes of comparing relative costs of alternative policies.
>
[and]
>
>Again, I might not be thinking clearly enough here, but it seems to
>me that Chris's comment above applies equally to each of the
>alternative policy scenarios, i.e.:
>
>>If we 'do nothing' about climate change, we do not know exactly how fast
>>our economies will grow, we do not know exactly how quickly we will find it
>>economic to introduce lower-carbon sources of energy, we do not know
>>exactly how much the climate will respond to the extra carbon we put into
>>the atmosphere, we do not know exactly how that changed climate will affect
>>economic and non-economic activity, and we do not know exactly how the
>>valuation of that changed activity will develop.
>
>Sorry if I'm just being obtuse, but I am grateful at any rate for
>your helping me work through these issues and figures.
>
>Jim T.
>

Schneider's point is that even with the footnote, characterising the
impacts as 'about $5 trillion' gives a misleading impression of precision.

For instance, in a 1996 paper, we reported the result of some model runs as
showing the 90% confidence interval of the impacts of business as usual
emissions would be between $4 trillion and $41 trillion, with a mean value
of $18 trillion. What is more this uncertainty does not include varying the
discount rate (it assumes a 3% per yer rate of pure time preference). If
you do the sums at a 0% rate of pure time preference (which some people
argue is the only ethically defensible rate) the 90% confidence interval of
the business as usual impacts is $198 trillion to $2058 trillion, with a
mean value of $921 trillion.

We concluded '...in reading any study on the valuation of global warming
impacts, policy makers are advised to carefully consider the treatment of
uncertainty as well as assumptions about adaptation to climate change,
non-linearity in damage as a function of temperature rise, secondary
benefits to CO2 abatement, and the discount rate. We have shown that these
assumptions, often hidden in the small print or not reported at all, have a
profound effect upon the marginal impact calculations' (E L Plambeck and C
Hope, 'PAGE95, an updated valuation of the impacts of global warming',
Energy Policy, vol 24, pp 783-793, 1996).

And yes, this uncertainty applies equally to the alternative policies as
well.

Chris


Chris Hope, Judge Institute of Management,
University of Cambridge, Cambridge CB2 1AG, UK.
Voice: +44 1223 338194.   Fax: +44 1223 339701
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