From the Institute for Energy Research:

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It is this second class of models, the economic/climate hybrids called Integrated Assessment Models, that Pindyck discusses. Pindyck’s paper is titled, “Climate Change Policy: What Do the Models Tell Us?” Here is his shocking answer, contained in the abstract:

Very little. A plethora of integrated assessment models (IAMs) have been constructed and used to estimate the social cost of carbon (SCC) and evaluate alternative abatement policies. These models have crucial flaws that make them close to useless as tools for policy analysis: certain inputs (e.g. the discount rate) are arbitrary, but have huge effects on the SCC estimates the models produce; the models’ descriptions of the impact of climate change are completely ad hoc, with no theoretical or empirical foundation; and the models can tell us nothing about the most important driver of the SCC, the possibility of a catastrophic climate outcome. IAM-based analyses of climate policy create a perception of knowledge and precision, but that perception is illusory and misleading. [Bold added.]

For those unfamiliar with academic prose, such inflammatory language is almost unheard-of, particularly for a politically sensitive topic such as climate change economics. Pindyck is here reaching the exact same conclusion that I gave in my recent testimony before Senator Barbara Boxer and other members of the Senate Environmental and Public Works Committee: The computer models used by the Obama Administration’s Working Group to estimate the so-called “social cost of carbon” should not be the basis of federal policy.

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“Any Result One Desires”

In my testimony, I said the “economist can produce just about any estimate of the social cost of carbon desired.” Pindyck reaches the same conclusion in his paper when he writes:

And here we see a major problem with IAM-based climate policy analysis: The modeler has a great deal of freedom in choosing functional forms, parameter values, and other inputs, and diﬀerent choices can give wildly diﬀerent estimates of the SCC and the optimal amount of abatement. You might think that some input choices are more reasonable or defensible than others, but no, “reasonable” is very much in the eye of the modeler. Thus these models can be used to obtain almost any result one desires. [Pindyck p. 5, bold added.]

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Full story: http://www.instituteforenergyresearch.org/2013/08/12/scathing-mit-paper-blasts-obamas-climate-models/

The paper is here:

Click to access Climate-Change-Policy-What-Do-the-Models-Tell-Us.pdf

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