Related Experiment Video
Updated: Jun 13, 2026
09:07
Experimental Research Examining How People Can Cope with Uncertainty Through Soft Haptic Sensations
Published on: September 16, 2015
Bounded uncertainty and climate change economics.
Christopher J Costello1, Michael G Neubert, Stephen A Polasky
1Donald Bren School of Environmental Science and Management, University of California, Santa Barbara, CA 93106, USA.
Summary
Imposing an upper bound on future temperature change significantly alters climate policy analysis. Optimal policies remain largely unaffected by this bound, even at high levels.
Area of Science:
- Environmental economics
- Climate change modeling
- Risk analysis
Background:
- Mainstream economic analyses of climate change policy are challenged by risk aversion and heavy-tailed uncertainty in temperature change.
- The implications of extreme temperature rise scenarios for economic policy are a critical concern.
Purpose of the Study:
- To investigate the impact of imposing an upper bound on future temperature change within a simple economic model.
- To re-evaluate the validity of mainstream economic analyses under bounded temperature uncertainty.
Main Methods:
- Development and application of a simplified economic model.
- Analysis of the effects of imposing an upper limit on temperature increase.
- Assessment of policy optimality using willingness-to-pay metrics.
Main Results:
- Imposing an upper bound on temperature change reverses previous arguments regarding policy invalidation.
- Optimal climate change policies demonstrate relative insensitivity to the chosen upper bound over a broad range.
- Willingness to pay to avoid climate change is robust to variations in the temperature bound.
Conclusions:
- Economic analyses of climate policy are reconcilable with bounded temperature uncertainty.
- The optimal policy response to climate change is less sensitive to extreme tail risks than previously suggested.
- Setting a high upper bound on temperature change provides a stable basis for climate policy decisions.
Related Concept Videos
01:16What is Climate?
Climate refers to the prevailing weather conditions in a specific area over an extended period. As the saying goes, “Climate is what you expect. Weather is what you get.” Climate is influenced by geographic factors, such as latitude, terrain, and proximity to bodies of water.
00:59Uncertainty: Overview
In analytical chemistry, we often perform repetitive measurements to detect and minimize inaccuracies caused by both determinate and indeterminate errors. Despite the cares we take, the presence of random errors means that repeated measurements almost never have exactly the same magnitude. The collective difference between these measurements - observed values - and the estimated or expected value is called uncertainty. Uncertainty is conventionally written after the estimated or expected value.
00:54Uncertainty: Confidence Intervals
The confidence interval is the range of values around the mean that contains the true mean. It is expressed as a probability percentage. The interpretation of a 95% confidence interval, for instance, is that the statistician is 95% confident that the true mean falls within the interval. The upper and lower limits of this range are known as confidence limits. The confidence limits for the true mean are estimated from the sample's mean, the standard deviation, and the statistical factor 't,' or...
01:50Global Climate Change
Throughout its ~4.5 billion year history, the Earth has experienced periods of warming and cooling. However, the current drastic increase in global temperatures is well outside of the Earth’s cyclic norms, and evidence for human-caused global climate change is compelling. Paleoclimatology, the study of ancient climate conditions, provides ample evidence for human-caused global climate change by comparing recent conditions with those in the past.
01:27Microbes and Climate Change
Microorganisms are pivotal agents in Earth's biogeochemical cycles, significantly influencing climate dynamics through their metabolic activities. These microbes modulate the levels of key greenhouse gases by both contributing to and helping mitigate climate change.Microbial Contributions to Greenhouse Gas EmissionsRising global temperatures accelerate microbial metabolism, which, in turn, speeds up the decomposition of organic matter. This process releases carbon dioxide (CO₂) through...
00:59Propagation of Uncertainty from Random Error
An experiment often consists of more than a single step. In this case, measurements at each step give rise to uncertainty. Because the measurements occur in successive steps, the uncertainty in one step necessarily contributes to that in the subsequent step. As we perform statistical analysis on these types of experiments, we must learn to account for the propagation of uncertainty from one step to the next. The propagation of uncertainty depends on the type of arithmetic operation performed on...