The Congressional Budget Office has released a new paper (pdf) on climate change. From the director's blog:

Given current uncertainties, crafting a policy response to climate change involves balancing two types of risks: the risks of limiting emissions to reach a temperature target and experiencing much more warming and much greater impacts than expected versus the risks of incurring costs to limit emissions when warming and its impacts would, in any event, have been less severe than anticipated.

Climate policies thus have a strong element of risk management: Depending on the costs of doing so, society may find it economically sensible to invest in reducing the risk of the most severe possible impacts from climate change even if their likelihood is relatively remote. In particular, the potential for unexpectedly severe and even catastrophic outcomes, even if unlikely, would justify more stringent policies than would result from simply balancing the costs of reducing emissions against the benefits associated with the expected or most likely resulting degree of warming. At the same time, the uncertainties in the link between emissions and climate change mean that even rigid quantitative targets are not likely to achieve a specific warming target.  Uncertainties may thus justify flexible mechanisms even though they may simultaneously justify relatively stringent policies.

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