Sensible climate policy in years of (still) uncertain climate sensitivity

Abstract

The policy impacts of uncertain climate sensitivity are simulated in the Dystopian Schumpeter-meeting-Keynes (DSK) model, an agent-based integrated assessment model. The effects of different approaches to equilibrium climate sensitivity (ECS) uncertainty are investigated along two different axes: whether policymakers adapt their policy to updated estimates of the climate sensitivity probability distribution, and which part of the probability distribution they focus on (expected value or 99th percentile, i.e. worst-case scenario), under 5 different policy mixes. Results indicate that a suitable choice of policy instruments is vital for limiting warming and policies’ economic repercussions. The choice of policy mix determines the type of trade-offs that ensue, influencing the effects of expectation-focus versus worst-case-focus and adaptiveness. We conclude that adaptiveness plays a very limited role except under very high true climate sensitivity, a role that will likely grow more limited the longer climate policy remains inadequate in scope.