I am happy to announce that my article entitled “The Aggregation Dilemma in Climate Change Policy Evaluation” has been accepted for publication in the journal Climate Change Economics.
The article deals with the following question:
We show that a policy maker who ignores regional data and instead relies on aggregated integrated assessment models is likely underestimating the carbon price and thus the required climate policy. Based on a simple theoretical model we give conditions under which the Aggregation Dilemma is expected to play a role in climate change cost-benefit analysis. We then study the importance of the Aggregation Dilemma with the integrated assessment model RICE (Nordhaus, 2000).
Aggregating all regions of the RICE-99 model into one region yields a 40% lower social cost of carbon than the RICE model itself predicts. Based on extrapolating the results a country-level integrated assessment model would give a more than eight times higher social cost of carbon compared to a fully aggregated model. We suggest that these tentative results require researchers to re-think the aggregation level used in integrated assessment models and to develop models at much lower levels of aggregation than currently available.
Here is the article if you are interested: pdf