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RECAST THE DICE AND ITS POLICY RECOMMENDATIONS

Published online by Cambridge University Press:  16 November 2010

Armon Rezai
Armon Rezai*
Affiliation:
Vienna University of Economics and Business
*
Address correspondence to: Armon Rezai, Department of Socio-Economics, Vienna University of Economics and Business, Nordbergstraße 15 B.4, 1090 Vienna, Austria; e-mail: arezai@wu.ac.at.
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Abstract

The DICE (for Dynamic Integrated model of Climate and the Economy) introduced two important policy aspects to the economic discussion of global warming. First, it argues for a “climate-policy ramp” that deems back-loading of mitigation optimal. Second, it demonstrates that an intergenerational tradeoff is at the heart of the mitigation problem. In this paper we argue that both of these findings rest on contestable assumptions. To demonstrate this a recast DICE is presented. Its outcomes show that DICE's predictions are not robust with higher migitations earlier on and slower temperature increases along the optimal path. The adoption of a baseline scenario in which pollution is a negative externality makes mitigating climate change a Pareto improvement. The alleged sacrifice of present generations vanishes. This strengthens the case for immediate policy action.

Keywords

DICEClimate ChangeOptimal Economic GrowthExternalityMitigation Policy
Type
Articles
Information
Macroeconomic Dynamics , Volume 14 , Supplement S2: Public Policy, Externalities, and Economic Growth , November 2010 , pp. 275 - 289
Copyright
Copyright © Cambridge University Press 2010

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References

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