Managing Climate Damages: Exploring Trade-Offs

Climate change is a challenging issue, fully of complexity and uncertainty. Decision-makers and the public need to consider the full costs to society of climate change, which includes both climate damages and climate management costs. To do so, we need better characterizations and understanding of the uncertainties and the trade-offs between costs and benefits. This information facilitates structured discussion about the potential value and cost of mitigation, uncertainties, and probabilities that are necessary to inform thinking about managing climate risks. This study considers key uncertainties and explores the trade-off decision space that results. We find a very broad relevant decision space for global emissions and temperature pathways, with economic growth, mitigation technology, climate sensitivity, and damages all important uncertainties, alone and in combination. We find that lower economically optimal global warming pathways are consistent with expectations of higher damages, lower as well as higher climate sensitivity, lower economic growth and/or emissions, and fuller mitigation technology sets. We find that while a higher climate sensitivity implies a lower optimal emissions pathway, it also implies that temperature will be harder to manage and potentially impossible to contain below low levels. Across our results, we find that only one of the combinations explored suggests an economically optimal pathway that stays below 2°C of warming, with none suggesting an optimal pathway below 1.5°C of warming. Only the combination of significant potential annual climate damages and a less sensitive climate system were consistent with an optimal pathway below 2°C. This insight raises questions about what we know, our expectations about the future and system dynamics, and what we need to believe to justify pursuing such climate objectives. Overall, the study's results motivate additional exploration of uncertainties and probability distributions, and provides insights relevant to R&D investments, economic growth, and climate system and damage research.