Climate-economy model scenario runs and sensitivity analysis using DICE-2016

This paper assesses the prospects for climate stabilization from both positive and normative economic perspectives, and with an eye to the conditions necessary for collective action across the three domains: domestic, international, and intergenerational. While it is well-established that international freeriding and transaction costs pose major impediments to successful environmental agreements, this analysis identifies the intergenerational domain as the source of  intractability due to long delays between enduring mitigation costs and enjoying their eventual climate benefits. This lag causes the net benefits for median-aged voters’ to be negative over their expected remaining lifespans. Drawing on estimates from several Integrated Assessment Models of the benefits and costs of climate stabilization actions, the analysis concludes that a program of domestic and international climate actions will be hopelessly stymied by the failure of the actions to pass individual and collective rationality tests. However, the dire implications of this conclusion leaves the door open to the possibility that some change in circumstances could undercut this conclusion. The assignment of rights, in particular, has that potential. Indeed, these circumstances echo the canonical insights from Ron Coase’s observation in The Problem of Social Cost (1960) that the arrangement of rights can have large effects on welfare when transaction costs for an externality are high. Current climate rights amount to a de facto open access right to pollute the atmosphere. Were a right to a stable climate for both for current and future generations recognized, added weight or leverage would apply in support of climate stabilization policies and international agreements. These legal changes could represent a counterweight to offset the inadequacy of support from the current self-interested generation. Indeed, some recent climate litigation argues that many nations’ constitutions already encompass an affirmative right to a stable climate, a proposition that could represent an inimitable means to break the climate impasse.

Methods
The quantitative analysis includes multiple components: 1) running integrated assessment models (RICE model, PACE-ICE, and DICE model) to evaluate the costs and benefits of climate policies, their distribution within countries, between countries, for median-age voters in different countries, and for future generations. The outputs from these models were combined with demographic data to evaluate the incidence of net benefits for current median-aged voters in different countries, long-term net benefits, and net benefits to subsequent generations.