Economics Inaction: Climate Change Sensitivity Analysis

The paper analyzes the DICE model's tendency to recommend minimal climate action, finding that the discount rate, assumed benefits of moderate warming, and the integration of climate science drive this 'timidity'. Modifying these assumptions leads to a higher marginal carbon price, though the authors argue that cost-effectiveness analysis may be more useful than economic optimization modelling due to long-run uncertainties.

• The DICE model's recommendation for minimal climate action is driven by three specific factors: the discount rate, the assumed benefits of moderate warming, and how the latest climate science is treated.
• Adjusting the three identified assumptions results in a model that recommends a rapidly rising and higher marginal carbon price, which in turn has a more significant impact on physical climate measures.
• At low discount rates, the synergy between model changes increases and the uncertainty regarding future damages makes long-run economic modelling less effective.
• The authors suggest that cost-effectiveness analysis, which focuses on shorter-term costs, may be more valuable than economic optimization modelling because it avoids some of the paradoxes associated with long-run projections.

APA

Stockholm Environment Institute (2009). Economics Inaction: Climate Change Sensitivity Analysis. https://www.sei.org/publications/economics-inaction-climate-change-sensitivity-analysis/

Chicago

Stockholm Environment Institute. Economics Inaction: Climate Change Sensitivity Analysis. 2009. https://www.sei.org/publications/economics-inaction-climate-change-sensitivity-analysis/.

Wikipedia

{{cite report |author=Stockholm Environment Institute |title=Economics Inaction: Climate Change Sensitivity Analysis |date=7 October 2009 |url=https://www.sei.org/publications/economics-inaction-climate-change-sensitivity-analysis/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stockholmenvironmentinstitute2009economics, author = {{Stockholm Environment Institute}}, title = {{Economics Inaction: Climate Change Sensitivity Analysis}}, institution = {Stockholm Environment Institute}, year = {2009}, month = oct, url = {https://www.sei.org/publications/economics-inaction-climate-change-sensitivity-analysis/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }