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Towards impact functions for stochastic climate change
journal contribution
posted on 2023-06-09, 00:27 authored by Francisco Estrada, Richard TolRichard TolMost functions of economic impact assume that climate change is smooth. We here propose impact functions that have stochastic climate change as an input. These functions are identical in shape and have similar parameters as do deterministic impact functions. The mean stochastic impacts are thus similar to deterministic impacts. Welfare effects are larger, and the stochasticity premium is larger than the risk premium. Results suggest that stochasticity is more important for past impacts than for future impacts. This outcome is partly caused by an underestimation of natural variability in the 21st century climate projections.
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Publication status
- Published
Journal
Climate Change EconomicsISSN
2010-0078Publisher
World Scientific PublishingExternal DOI
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4Volume
6Department affiliated with
- Economics Publications
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- No
Peer reviewed?
- Yes
Legacy Posted Date
2016-04-01Usage metrics
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