Abstract
The Interagency Working Group Memo on the social cost of carbon is used to compute the value of information (VOI) of climate observing systems. A generic decision context is posited in which society switches from a business as usual (BAU) emissions path to a reduced emissions path upon achieving sufficient confidence that a trigger variable exceeds a stipulated critical value. Using assessments of natural variability and uncertainty of measuring instruments, it is possible to compute the time at which the required confidence would be reached under the current and under a new observing system, if indeed the critical value is reached. Economic damages (worldwide) from carbon emissions are computed with an integrated assessment model. The more accurate observing system acquires the required confidence earlier and switches sooner to the reduced emissions path, thereby avoiding more damages which would otherwise be incurred by BAU emissions. The difference in expected net present value of averted damages under the two observing systems is the VOI of the new observing system relative to the existing system. As illustration, the VOI for the proposed space-borne CLARREO system relative to current space-borne systems is computed. Depending on details of the decision context, the VOI ranges from 2 to 30 trillion US dollars.
Highlights
In early 2010, the United States government published estimates of the social cost of carbon for use in regulatory cost–benefit analysis (Interagency Working Group on Social Cost of Carbon; IWG SCC 2010, hereafter SCC)
This paper uses the SCC to compute the value of information (VOI) provided by projected climate observing system (COS) improvements designed to learn about key climate parameters faster than existing observations
While the examples given here are for one of the future CLARREO advances relative to current satellite sensors, the concept is general and can in principle be extended to a wide range of climate observations with economic impacts such as sea level rise, anthropogenic aerosol radiative forcing, carbon cycle, or ocean acidification
Summary
In early 2010, the United States government published estimates of the social cost of carbon for use in regulatory cost–benefit analysis (Interagency Working Group on Social Cost of Carbon; IWG SCC 2010, hereafter SCC). This paper uses the SCC to compute the value of information (VOI) provided by projected climate observing system (COS) improvements designed to learn about key climate parameters faster than existing observations. To illustrate VOI calculations of COSs, this paper considers the proposed CLARREO space-borne observing system Driving this choice is the fact that key accuracy parameters of this system as compared to the current spacebased systems have been computed (Wielicki et al 2013). This initial VOI estimate uses several simplifying assumptions. Besides the assumptions underlying the SCC, we use the integrated assessment model DICE coupling climate change to economic damages (Nordhaus 2008), and we simplify the decision context in many ways. This is certainly not the last word on the subject; see Cooke (2012) for background on uncertainty analysis and climate change
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