Monetizing the Value of Measurements of Equilibrium Climate Sensitivity Using the Social Cost of Carbon
This study shows how real options theory in combination with the social cost of carbon may help to calculate the value of information regarding equilibrium climate sensitivity and estimate the relative advantages of two different Earth Observing Systems.
There has been much work on the value of learning about climate and the value of information regarding the climatic system. The present research moves beyond an abstract hypothesis about future learning and considers concrete Earth Observing Systems that could enhance knowledge of the climatic system and better inform decision makers. This study shows how real options theory in combination with the social cost of carbon may help to calculate the value of information regarding equilibrium climate sensitivity and estimate the relative advantages of two different Earth Observing Systems (EOSs) for learning about ECS. One system aims to improve measurements of decadal global temperature increase and another targets measurements of decadal change of global cloud radiative effect. The paper concludes that a new EOS that substantially reduces the uncertainty in cloud radiative effect would be expected to have more value than improving estimations of the global surface temperature alone.
Senior Fellow Emeritus
Roger Cooke is a senior fellow emeritus at RFF. He joined RFF in September 2005 as the first appointee to the Chauncey Starr Chair in Risk Analysis.
Rosemary Rallo Baize
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