DICE model

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The Dynamic Integrated Climate-Economy model, referred to as the DICE model or Dice model, is a neoclassical integrated assessment model developed by 2018 Nobel Laureate William Nordhaus that integrates in the neoclassical economics, carbon cycle, climate science, and estimated impacts allowing the weighing of subjectively guessed costs and subjectively guessed benefits of taking steps to slow climate change. Nordhaus also developed the RICE model (Regional Integrated Climate-Economy model), a variant of the DICE model that was updated and developed alongside the DICE model.[1][2][3][4] Researchers who collaborated with Nordhaus to develop the model include David Popp, Zili Yang, and Joseph Boyer.[2]

The DICE model is one of the three main integrated assessment models used by the United States Environmental Protection Agency, and it provides estimates intermediate between the other two models.[4][5]

History[edit]

Precursors[edit]

According to a summary of the DICE and RICE models prepared by Stephen Newbold,[1] the earliest precursor to DICE was a linear programming model of energy supply and demand in two 1977 papers of William Nordhaus.[6][7] Although dynamic (in that it considered the changing levels of supply of fuel based on supply and demand and the consequence impact on carbon dioxide emissions) the model did not attempt to measure the economic impact of climate change.[1] A 1991 paper by Nordhaus developed a steady-state model of both the economy and climate, coming quite close to the DICE model.[1][8]

The model[edit]

The model appears to have first been proposed by economist William Nordhaus in a discussion paper for the Cowles Foundation in February 1992.[9] He also wrote a brief note outlining the main ideas in an article for Science in November 1992.[10] A subsequent revised model was published in Resource and Energy Economics in 1993.[11][12]

Nordhaus published an improved version of the model in the October 1994 book Managing the Global Commons: The Economics of Climate Change,[13] with the first chapter as well as an appendix containing a computer program both freely available online.[14][15] Marian Radetzki reviewed the book for The Energy Journal.[16]

In 1996, Nordhaus and Zili Yang published an article titled A regional dynamic general-equilibrium model of alternative climate-change strategies at The American Economic Review, established the RICE (Regional Integrated model of Climate and the Economy) model.[17]

In 1998, Nordhaus published a revised version of the DICE model in multiple papers, one of which was coauthored with Joseph Boyer in order to understand the effects of the proposed Kyoto Protocol.[18][19]

In 1999, Nordhaus published computer programs and spreadsheets implementing a revised version of the DICE model as well as a variant called the RICE model (RICE stands for Regional Integrated Climate-Economics, signifying that the modeling of economics and climate are being done only for a particular region rather than the whole world).[20][21]

In 2000, Nordhaus and Boyer co-authored a book published by MIT Press titled Warming the World: Economic Models of Global Warming with a detailed description of the updated DICE and RICE models.[22]

In 2001, Nordhaus published revised spreadsheets for the RICE model.[23]

In November 2006, Nordhaus published a new version of the DICE model with updated data, and used it to review the Stern Review.[2][24][25]

In 2010, updated RICE and DICE models were published, and the new RICE model was explained by Nordhaus in an article for the Proceedings of the National Academy of Sciences (US).[26][27]

In 2013, the book The Climate Casino by Nordhaus, with updated discussion of the DICE and RICE models and the broader policy implications, was published by Yale University Press.[28] A background on the latest version of the models as used in the book was published on Nordhaus' website.[29][30]

2020 rework[edit]

In 2020, modelers from the Potsdam Institute for Climate Impact Research (PIK) reported a rerun of the DICE model using updated climate and economic information and found that the economically optimal climate goal was now less than 2.0 °C of global warming — and not the 3.5 °C that Nordhaus had originally calculated.[31][32] The PIK team employed current understandings of the climate system and more modern social discount rates.[33] This new result therefore broadly supports the Paris Agreement goal of holding global warming to "well below 2.0 °C". Their revised AMPL code and data are available under open licenses.[34]

Assumptions and outcomes[edit]

According to the original formulation of DICE, staying below the 2°C as agreed by the Paris agreement would cost more in mitigation investments than would be saved in damage from climate change. A 2020 paper by Glanemann, Willner and Levermann, which used an updated damage function, revised this conclusion, showing that a warming of around 2°C would be "optimal", depending on the climate sensitivity to greenhouse gases.[35]

The DICE model is an example of a neoclassical energy-economy-environment model. The central assumption of this type of model is that market externalities create costs not captured in the price system and that government must intervene to assure that these costs are included in the supply price of the good creating the externality. Innovation is assumed to be exogenous; as such, the model is a pre-ITC model (it does not yet include Induced Technological Change).[36] An extension of the model (DICE-PACE) that does include induced technological change, has strongly different outcomes: the optimal path would be to invest strongly early on in mitigation technology.[37] In contrast to non-equilibrium models, investment in low carbon technology is assumed to crowd-out investments in other parts of the economy, leading to a loss of GDP.[36]

Reception[edit]

Academic reception[edit]

A number of variants of the DICE model have been published by researchers working separately from Nordhaus.[38][39] The model has been criticised by Steve Keen for a priori assuming that 87% of the economy will be unaffected by climate change, misrepresenting contributions from natural scientists on tipping points, and selecting a high discount rate.[40]

Reception in the public policy world[edit]

The DICE and RICE models have received considerable attention from others studying the economic impact of climate change. It is one of the models used by the Environmental Protection Agency for estimating the social cost of carbon.[4][5] Stephen Newbold of the Environmental Protection Agency in the United States reviewed the models in 2010.[1]

The Basque Centre for Climate Change, in an October 2009 review of integrated assessment models for climate change, discussed the DICE model in detail.[41]

A report from the Heritage Foundation, a conservative think tank in the United States, called the DICE model "flawed beyond use for policymaking" on account of its extreme sensitivity to initial assumptions.[5] Similar criticisms, including criticisms of the specific choice of discount rates chosen in the model, have been made by others.[42][43] Many of these criticisms were addressed in the § 2020 rework listed above.

See also[edit]

External links[edit]

References[edit]

  1. ^ a b c d e Newbold, Stephen (November 2010). "Summary of the DICE model" (PDF). Retrieved February 19, 2014.
  2. ^ a b c Nordhaus, William (October 2017). "DICE/RICE models - William Nordhaus - Yale Economics". Retrieved October 11, 2018.
  3. ^ Nordhaus, William; Boyer, Joseph (October 1999). "Summary of Roll the DICE Again: The Economics of Global Warming". Archived from the original on September 17, 2015. Retrieved February 19, 2014.
  4. ^ a b c "Dynamic Integrated Climate Economy model (DICE)". Environmental Protection Agency, United States. Retrieved February 19, 2014.
  5. ^ a b c Dayaratna, Kevin; Kreutzer, David (November 21, 2013). "Loaded DICE: An EPA Model Not Ready for the Big Game". Retrieved February 19, 2014.
  6. ^ Nordhaus, William (1977). "Strategies for the control of carbon dioxide (Cowles Foundation discussion paper no. 443" (PDF). Retrieved February 19, 2014.
  7. ^ Nordhaus, Wiliam (February 1977). "Economic Growth and Climate: The Carbon Dioxide Problem" (PDF). 67 (1). American Economic Review: 341–346. Archived from the original (PDF) on November 6, 2013. Retrieved February 19, 2014. Cite journal requires |journal= (help)
  8. ^ Nordhaus, William (July 1991). "To Slow or Not to Slow: The Economics of the Greenhouse Effect". The Economic Journal. 101 (407): 920–937. doi:10.2307/2233864. JSTOR 2233864.
  9. ^ Nordhaus, William (February 1992). "The "Dice" Model: Background and Structure of a Dynamic Integrated Climate-Economy Model of the Economics of Global Warming (Cowles Foundation discussion paper no. 1009)" (PDF). Retrieved February 19, 2014.
  10. ^ Nordhaus, William (November 20, 1992). "An Optimal Transition Path for Controlling Greenhouse Gases" (PDF). Science. 258 (5086): 1315–1319. Bibcode:1992Sci...258.1315N. doi:10.1126/science.258.5086.1315. PMID 17778354. S2CID 23232493. Archived from the original (PDF) on November 16, 2015. Retrieved February 19, 2014.
  11. ^ Nordhaus, William. "Original DICE and RICE models". Archived from the original on October 8, 2014. Retrieved February 19, 2014.
  12. ^ Nordhaus, William (1993). "Rolling the 'DICE': An Optimal Transition Path for Controlling Greenhouse Gases" (PDF). Resource and Energy Economics. 15: 27–50. doi:10.1016/0928-7655(93)90017-O.
  13. ^ Nordhaus, William (October 4, 1994). Managing the Global Commons: The Economics of Climate Change. MIT Press.
  14. ^ Nordhaus, William (October 4, 1994). "Appendix. Computer Program for DICE model". Archived from the original on June 28, 2015. Retrieved February 19, 2014.
  15. ^ Nordhaus, William. "Chapter 1 (Managing the Global Commons". Archived from the original on June 27, 2015. Retrieved February 19, 2014.
  16. ^ Radetzki, Marian (1995). "Managing the Global Commons: The Economics of Climate Change". The Energy Journal. 16 (2): 132–135. JSTOR 41323453.
  17. ^ WD Nordhaus, Z Yang - A regional dynamic general-equilibrium model of alternative climate-change strategies The American Economic Review, 1996
  18. ^ Nordhaus, William. "III. Research Papers Using revised DICE and RICE Models". Archived from the original on October 8, 2014. Retrieved February 19, 2014.
  19. ^ Nordhaus, William; Boyer, Joseph (February 8, 1999). "Requiem for Kyoto: An Economic Analysis of the Kyoto Protocol" (PDF). Archived from the original (PDF) on October 6, 2000. Retrieved February 19, 2014.
  20. ^ Nordhaus, William. "GAMS Computer Programs for RICE-99". Archived from the original on October 8, 2014. Retrieved February 19, 2014.
  21. ^ Nordhaus, William. "Spreadsheet Versions of DICE-99 and RICE-99 models". Archived from the original on October 8, 2014. Retrieved February 19, 2014.
  22. ^ Nordhaus, William; Boyer, Joseph (August 21, 2000). Warming the World: Economic Models of Global Warming (hardcover). MIT Press. Archived from the original on September 16, 2015. Retrieved February 19, 2014.
  23. ^ Nordhaus, William. "Spreadsheet Version of RICE-2001 Model Used for Science Article". Retrieved February 19, 2014.
  24. ^ Nordhaus, William (November 16, 2006). "DICE model recalibrated to data for November 2006". Archived from the original on October 8, 2014. Retrieved February 19, 2014.
  25. ^ Nordhaus, William (November 17, 2006). "Documentation for DICE-2006, November 2006 round" (PDF). Archived from the original (PDF) on October 14, 2014. Retrieved February 19, 2014.
  26. ^ Nordhaus, William (May 10, 2010). "Economic aspects of global warming in a post-Copenhagen environment". Proceedings of the National Academy of Sciences. 107 (26): 11721–11726. Bibcode:2010PNAS..10711721N. doi:10.1073/pnas.1005985107. PMC 2900661. PMID 20547856.
  27. ^ Nordhaus, William (March 20, 2012). "RICE-2010 and DICE-2010 Models (as of March 20, 2012)". Archived from the original on October 19, 2014. Retrieved February 19, 2014.
  28. ^ Nordhaus, William (October 22, 2013). The Climate Casino: Risk, Uncertainty, and Economics for a Warming World. Yale University Press. ISBN 978-0300189773.
  29. ^ Nordhaus, William. "Background on the DICE Models For Readers of The Climate Casino (2013)". Archived from the original on February 25, 2014. Retrieved February 19, 2014.
  30. ^ Nordhaus, William (January 22, 2014). "Scientific and Economic Background on DICE-2013R Model as of January 22, 2014". Archived from the original on February 25, 2014. Retrieved February 19, 2014.
  31. ^ PIK (13 July 2020). "An economic case for the UN climate targets: early and strong climate action pays off" (Press release). Potsdam, Germany: Potsdam Institute for Climate Impact Research. Retrieved 2020-10-08. German language version available also.
  32. ^ Hänsel, Martin C; Drupp, Moritz A; Johansson, Daniel J A; Nesje, Frikk; Azar, Christian; Freeman, Mark C; Groom, Ben; Sterner, Thomas (13 July 2020). "Climate economics support for the UN climate targets". Nature Climate Change. 10 (8): 781–789. Bibcode:2020NatCC..10..781H. doi:10.1038/s41558-020-0833-x. ISSN 1758-6798. closed access
  33. ^ Drupp, Moritz A; Freeman, Mark C; Groom, Ben; Nesje, Frikk (1 November 2018). "Discounting disentangled" (PDF). American Economic Journal: Economic Policy. 10 (4): 109–134. doi:10.1257/pol.20160240. ISSN 1945-7731.
  34. ^ Hänsel, Martin C (13 May 2020). Data and code for "Climate economics support for the UN climate targets. Ann Arbor, Michigan, USA: Inter-university Consortium for Political and Social Research. doi:10.3886/E119395V1. Retrieved 2020-10-08. AMPL code. Licensed CC‑BY‑4.0.
  35. ^ Glanemann, Nicole; Willner, Sven N.; Levermann, Anders (2020-01-27). "Paris Climate Agreement passes the cost-benefit test". Nature Communications. 11 (1): 110. Bibcode:2020NatCo..11..110G. doi:10.1038/s41467-019-13961-1. ISSN 2041-1723. PMC 6985261. PMID 31988294.
  36. ^ a b Mercure, Jean-Francois; Knobloch, Florian; Pollitt, Hector; Paroussos, Leonidas; Scrieciu, S. Serban; Lewney, Richard (2019-09-14). "Modelling innovation and the macroeconomics of low-carbon transitions: theory, perspectives and practical use". Climate Policy. 19 (8): 1019–1037. doi:10.1080/14693062.2019.1617665. ISSN 1469-3062.
  37. ^ Grubb, Michael; Wieners, Claudia (January 2020). "Modeling Myths: On the Need for Dynamic Realism in DICE and other Equilibrium Models of Global Climate Mitigation" (PDF). Institute for new economic thinking.
  38. ^ Traeger, Christian (December 1, 2013). "A 4-Stated Dice: Quantitatively Addressing Uncertainty Effects in Climate Chan". Social Science Research Network. SSRN 2270473. Cite journal requires |journal= (help)
  39. ^ Popp, David (2004). "Entice: Endogenous Technological Change In The DICE Model Of Global Warming" (PDF). Journal of Environmental Economics and Management. 48 (1): 742–768. doi:10.1016/j.jeem.2003.09.002. S2CID 154637373.
  40. ^ Keen, Steve (2020-09-01). "The appallingly bad neoclassical economics of climate change". Globalizations: 1–29. doi:10.1080/14747731.2020.1807856. ISSN 1474-7731.
  41. ^ Ramon Arigoni Ortiz; Anil Markandya (October 2009). "Integrated Impact Assessment Models of Climate Change with an Emphasis on Damage Functions: a Literature Review". Basque Centre for Climate Change. Retrieved February 19, 2014.
  42. ^ Stanton, Elizabeth (April 2009). "Towards Greater Transparency in Climate Economics: Deconstructing DICE-2007 (a brief prepared for Economics for Equity and the Environment Network)" (PDF). Archived from the original (PDF) on July 23, 2014. Retrieved February 19, 2014.
  43. ^ "Criticism of economic models". Lomborg-errors.dk. Retrieved February 19, 2014.