For those who both believe in the reality of climate change and dream of a day when Congress might get past gridlock and address the issue, the critical question is how to price carbon emissions to reflect the external costs that the use of carbon imposes on society: the “social cost of carbon”, or SCC. Recently, attention has focused on efforts to develop “Integrated Assessment Models.” The point of the IAMs is to integrate the scientific analysis of the changing climate with the economic costs that would result from varying degrees of climate change.

Robert Pindyck of MIT just prepared a working paper for the National Bureau of Economic Research assessing the current state of IAM development and what the models tell us at this point about the SCC. The article abstract begins with these simple two words:

Not much.

The paper is sufficiently technical that I will not try to summarize it here. Suffice it to say that I found its criticisms of IAMs cogent. It is important to note, however, that Pindyck does not suggest that policy efforts to regulate carbon emissions should cease. As he suggests:

One can think of a GHG abatement policy as a form of insurance: society would be paying for a guarantee that a low-probability catastrophe will not occur (or is less likely).

We just should not base the price of that insurance on the results of a model that provides a false sense that we know how to measure the social costs of carbon.