To Hedge or Not Against an Uncertain Climate Future?

Abstract

The economically based study reported in this Policy Forum uses a modified DICE-99 modeling structure to explore the relative efficacy of implementing near-term mitigation policies as a hedge against model, calibration, and implementation uncertainties about temperature targets and climate sensitivity. Implementing modest mitigation over the near term minimizes the expected cost of selecting equally likely temperature targets in 2035 across a recently calibrated probability distribution for climate sensitivity that extends up to 9ÂoC. Hedging effectively buys insurance against future adjustment costs and is extremely robust across most possible futures, especially when compared with a wait-and-see strategy that would eschew mitigation over the first third of this century.