Three Surprises About Nobel Laureate Nordhaus’s Model of Climate Change

By Robert Murphy. Excerpt:

"Conclusion

William Nordhaus is a pioneer in the economics of climate change, who arguably invented the discipline in its modern form. His so-called DICE model of the global economy and climate system is state-of-the-art, and was one of three selected by the Obama Administration to estimate the “social cost of carbon.” In recognition of his accomplishments, Nordhaus was one of this year’s Nobel laureates in economics.

Despite his prestige, Nordhaus’s model has serious shortcomings, as I documented in The Independent Review in 2009. Looking back, there are three surprising facts about Nordhaus’s model that are relevant to today’s policy debate:

First, Nordhaus shows that aggressive mitigation policies can be a cure worse than the disease, and he specifically included the United Nation’s latest goal in his examples of such misguided goals. Second, Nordhaus’s estimate of the optimal carbon tax (for the year 2025, for example) has almost tripled in less than a decade. Third, far from being tied to specific analyses of particular threats, Nordhaus’ global damage estimate was largely driven by a simple survey of experts, and this figure was furthermore manipulated arbitrarily by Nordhaus in light of new developments. The public would be very surprised to learn just how crude the “settled science” underlying various proposals to limit climate change really is."