A New Perspective on Climate Policy
The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Valentina Bosetti, Carlo Carraro, Emanuele Massetti and Massimo Tavoni
Chapter 4: Coping with Uncertainty
Economic analysis of climate change has emerged as a major area of research, with important repercussions for policy advice.1 Within this topic, integrated assessment modelling is a quintessential instrument because it allows to characterise most of the features of climate change, and to inform climate policy. Among the many subjects that have been addressed through modelling, the issue of uncertainty emerges as one of the most prominent. Climate change is known to be characterised by a cascade of uncertainties that cover every aspect of the problem: from climate change science, to climate change impacts and finally to climate change solutions. The recognition of these issues is so important that the IPCC remarked the need for a ‘risk management approach’ when dealing with climate change. Two of the mostly widely discussed papers in the past few years (Stern, 2006, and Weitzman, 2009) have brought uncertainty right at the heart of their analysis, and have shown the extent to which it affects the solution space. The next IPCC assessment report in its third working group has dedicated one chapter to uncertainty. Even in informal discussions among informed readers of climate change, uncertainty is likely to be one of the topics of convergence, and potentially, of consensus. Although the methodological tool for incorporating uncertainty into climate change modelling is known, its implementation has often been limited, since it requires interdisciplinary competences and normally leads to considerable complications for both model formulation and solution. In this chapter, we report some of the analysis under uncertainty that has been carried out at FEEM in the course of recent years, which has involved the modification and extension of the WITCH model to be able to include the most salient features of uncertainty.
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