ABSTRACT
The uncertainties about the climate sensitivity parameter, and about the physical processes of climate change in general, are not the only unknowns that climate economics must confront. Additional uncertainty surrounds the economic damages that result from a given temperature, or other physical manifestations of climate change such as sea-level rise. Such damages are often represented in integrated assessment models by a “damage function” expressing economic losses as a function of temperature. Simple algebraic expressions are often used, as a reduced-form estimate of damages as a whole. It is not surprising to find that model estimates are strongly dependent on the unknown, hypothesized form of the damage function. For a review of a wide range of functional forms that have appeared in recent literature and their effects on estimates of damages, see Kopp et al. (2012).
