Essays on the economic implications of climate change uncertainties

• Main Author: Kessler, Louise
• Format: Text
• Language: English
• Published: London School of Economics and Political Science (LSE) 2017
• Subjects: GE Environmental Sciences; permafrost
• Online Access: https://dx.doi.org/10.21953/lse.vvoolmkfwfe1; http://etheses.lse.ac.uk/3723/

This thesis investigates the economic implications of climate change uncertainties. It seeks to contribute to the existing literature by exploring various aspects of how uncertainty can and should be integrated in economic assessments of climate impacts and what this entails for policy-making. For several reasons, including analytical tractability and the difficulties of accommodating uncertainty in individual and social decision-making, the full scale of climate change uncertainties is often artificially reduced in economic assessments of climate change, e.g. through the use of best estimates, averages or mid-point scenarios. However, the impacts of future climate change on humankind are highly uncertain and require full investigation. The approach taken in this thesis has therefore been to ask new questions related to the economic implications of climate change uncertainties and to address each problem using innovative methods, which allow a more accurate characterization of the uncertainties at stake and of their potential interactions. This thesis comprises four standalone chapters (Chapter 2 to 5). The first chapter (Chapter 2) investigates how uncertainty about the benefits of climate mitigation, about future economic growth and about the relationship between these uncertainties affects the rate at which we should discount the benefits of reducing greenhouse gas emissions today. The second chapter (Chapter 3) examines the impact of including the permafrost carbon feedback in the DICE Integrated Assessment Model on the social cost of carbon and on the optimal global mitigation policy. Whereas the first two chapters rely on the use of an Integrated Assessment Model, the final two chapters are based on econometric methods applied to weather and climate variables. The third chapter (Chapter 4) explores the impacts of droughts on regional economic growth in the United States. The last chapter (Chapter 5) examines the implications of temperature on inflation and central banks’ policy interest rates.