Content area
Full Text
Environ Resource Econ (2017) 67:93125 DOI 10.1007/s10640-015-9978-x
http://crossmark.crossref.org/dialog/?doi=10.1007/s10640-015-9978-x&domain=pdf
Web End = http://crossmark.crossref.org/dialog/?doi=10.1007/s10640-015-9978-x&domain=pdf
Web End = Global Warming and a Potential Tipping Pointin the Atlantic Thermohaline Circulation: The Role of Risk Aversion
Mariia Belaia1,3 Michael Funke1,4
Nicole Glanemann2,5
http://orcid.org/0000-0003-2074-8799
Web End = Accepted: 7 October 2015 / Published online: 13 October 2015 Springer Science+Business Media Dordrecht 2015
Abstract The risk of catastrophes is one of the greatest threats of climate change. Yet, conventional assumptions shared by many integrated assessment models such as DICE lead to the counterintuitive result that higher concern about climate change risks does not lead to stronger near-term abatement efforts. This paper examines whether this result still holds in a rened DICE model that employs the EpsteinZin utility specication and that is fully coupled with a dynamic tipping point model describing the evolution of the Atlantic thermohaline circulation (THC). Risk is captured by the possibility of a future collapse of the circulation and it is nourished by fat-tailed uncertainty about climate sensitivity. This uncertainty is assumed to resolve in the middle of the second half of this century and the near-term abatement efforts, which are undertaken before that point of time, can be adjusted afterwards. These modelling choices allow posing the question of whether aversion to this specic tipping point risk has a signicant effect on near-term policy efforts. The simulations, however, provide evidence that it has little effect. For the more likely climate sensitivity values, a collapse of the circulation would occur in the more distant future. In this case, acting after learning can prevent the catastrophe, implying the remarkable insensitivity of the near-term policy to risk aversion. For the rather unlikely and high climate sensitivity values, the expected damage costs are not great enough to justify taking very costly measures to safeguard the THC. Our simulations
B Mariia Belaia
Michael Funke [email protected]
Nicole [email protected] Department of Economics, University of Hamburg, Von-Melle-Park 5, 20146 Hamburg, Germany2 Potsdam Institute for Climate Impact Research, Telegraphenberg A 31, P.O. Box 60 12 03, 14412 Potsdam, Germany3 The International Max Planck Research School on Earth System Modelling, Hamburg, Germany4 CESifo, Munich, Germany5 WHU - Otto Beisheim School of Management, Vallendar, Germany
123
94 M. Belaia et al.
also provide some indication that risk aversion might...