Must-Read: Robert Pindyck: The Use and Misuse of Models for Climate Policy

Must-Read: Robert Pindyck: The Use and Misuse of Models for Climate Policy: “Integrated assessment models (IAMs) have flaws that make them close to useless…

…as tools for policy analysis… create a perception of knowledge and precision that is illusory, and can fool policy-makers into thinking that the forecasts the models generate have some kind of scientific legitimacy…. A simpler and more transparent approach to the design of climate change policy is preferable…. What really matters for the SCC is the likelihood and possible impact of a catastrophic climate outcome: a much larger-than-expected temperature increase and/or a much larger-than-expected reduction in GDP caused by even a moderate temperature increase. IAMs, however, simply cannot account for catastrophic outcomes. Unless we are ready to accept a discount rate that is very small, the “most likely” scenarios for climate change simply don’t generate enough damages–in present value terms–to matter. That is why the Interagency Working Group, which used a 3 percent discount rate, obtained the rather low estimate of $33 per ton for the SCC…