Real Option Analysis and Climate Change by Benoit Morel

Author:Benoit Morel
Language: eng
Format: epub
ISBN: 9783030120610
Publisher: Springer International Publishing

5.3 Extracting Finite Numbers Out of Infinities

Does the fact that the ROA value of mitigation is infinite preclude the possibility of finding finite numbers useful for mitigation policy? After all the 1965 Nobel Prize-winning physicists (Richard Feynman, Julian Schwinger, Shin’ichirō Tomonaga) perfected the art of extracting meaningful finite numbers out of infinities in quantum field theory.

5.3.1 Probability of Exceedance and the Importance of the Parameter ΔT0 in Eq. 5.1

For each value of the atmospheric load of CO2, there is a different PDF for the temperature increase. They all have the same asymptotic behavior when ΔT → ∞, i.e., they go like , but they differ on the value of one key parameter ΔT0. ΔT0 is what the increase of temperature at equilibrium would be, without feedback. Baker and Roe used ΔT0 = 1.2°C for climate sensitivity, which corresponds to doubling the atmospheric load of CO2 with respect to preindustrial time.

With that value for ΔT0 (and the value of the feedback parameters and σf = 0.14), the probability that the temperature increase at equilibrium will exceed 2 °C is above 90% (Cf. Fig. 5.2). To have a probability less than 5%, the value of ΔT0 should be about ten times smaller.

Fig. 5.2The probability of exceeding 2 °C, as a function of ΔT0 with the formula of Baker and Roe. The horizontal axis is ΔT0 and the vertical axis gives the probability of exceedance

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