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Modeling myths: On DICE and dynamic realism in integrated assessment models of climate change mitigation

Grubb, M; Wieners, C; Yang, P; (2021) Modeling myths: On DICE and dynamic realism in integrated assessment models of climate change mitigation. Wiley Interdisciplinary Reviews: Climate Change , Article e698. 10.1002/wcc.698. (In press). Green open access

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Abstract

We analyze how stylized Integrated Assessment Models (IAMs), and specifically the widely‐used Dynamic Integrated Climate‐Economy model (DICE), represent the cost of emissions abatement. Many assume temporal independence—that abatement costs in one period are not affected by prior abatement. We contrast this with three dimensions of dynamic realism in emitting systems: (i) inertia, (ii) induced innovation, and (iii) path dependence. We review key evidence from the last quarter century on each of these three components. Studies of stock lifetime, dynamics of diffusion and past transitions suggest typical transition timescales of at least 20–40 years for the bulk emitting systems. The evidence that substantial innovation is induced by both prices and market deployment is unambiguous. Finally, both data and a rapidly growing literature demonstrate substantial path dependence in general, and specifically “carbon lock‐in and lock‐out.” Some stylized models in the past decade have incorporated technology learning, and others have considered inertia, but the combination of these factors is important and not yet evident. More complex hybrid IAMs with technology‐rich energy‐system models incorporate these factors, but their complexity has limited the wider understanding and influence of their underlying insights. Few if any global models fully represent path dependence. We conclude with likely implications drawing upon the empirical and modeling evidence accumulated, including results from extending DICE with a highly stylized representation of such dynamic factors. This suggests that dynamic interdependencies could multiply several‐fold the optimal level of initial abatement expenditure. This is because early abatement then also directly facilitates subsequent emission savings. The diversity of dynamic linkages across sectors and technologies also implies more nuanced policy than a single global carbon price. Thus, the issues explored in this review can radically change the general policy conclusions drawn from models, which, like DICE, neglect dynamic realism.

Type: Article
Title: Modeling myths: On DICE and dynamic realism in integrated assessment models of climate change mitigation
Open access status: An open access version is available from UCL Discovery
DOI: 10.1002/wcc.698
Publisher version: https://doi.org/10.1002/wcc.698
Language: English
Additional information: Copyright © 2021 The Authors. WIREs Climate Change published by Wiley Periodicals LLC. This is an open access article under the terms of the Creative Commons Attribution‐NonCommercial License (http://creativecommons.org/licenses/by-nc/4.0/), which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.
Keywords: climate change, DICE, induced innovation, integrated assessment models, path dependence, pollution abatement control expenditure
UCL classification: UCL
UCL > Provost and Vice Provost Offices > School of Education
UCL > Provost and Vice Provost Offices > School of Education > UCL Institute of Education
UCL > Provost and Vice Provost Offices > School of Education > UCL Institute of Education > IOE - Social Research Institute
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Bartlett School Env, Energy and Resources
URI: https://discovery.ucl.ac.uk/id/eprint/10121598
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