Scandinavian Working Papers in Economics

Seminar Papers,
Stockholm University, Institute for International Economic Studies

No 757: Uncertainty, Climate Change and the Global Economy

David von Below () and Torsten Persson ()
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David von Below: Institute for International Economic Studies, Stockholm University, Postal: Stockholm University, S-106 69 Stockholm, Sweden
Torsten Persson: Institute for International Economic Studies, Stockholm University, Postal: Stockholm University, S-106 69 Stockholm, Sweden

Abstract: The paper illustrates how one may assess our comprehensive uncertainty about the various relations in the entire chain from human activity to climate change. Using a modified version of the RICE model of the global economy and climate, we perform Monte Carlo simulations, where full sets of parameters in the model’s most important equations are drawn randomly from pre-specified distributions, and present results in the forms of fan charts and histograms. Our results suggest that under a Business-As-Usual scenario, the median increase of global mean temperature in 2105 relative to 1900 will be around 4.5 C. The 99 percent confidence interval ranges from 3.0 C to 6.9 C. Uncertainty about socio-economic drivers of climate change lie behind a non-trivial part of this uncertainty about global warming.

Keywords: Climate-economy models; Global warming; Monte Carlo study

JEL-codes: E17; O13; Q54

28 pages, October 17, 2008

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