DICE-RD: an implementation of rate-related damages in the DICE model

Abstract

A growing body of literature from the natural and the social sciences indicates that the rate of temperature increase is another key driver of total climate damages, next to the absolute increase in temperature compared to the pre-industrial level. Nonetheless, the damage functions employed in integrated assessment models that aim at studying the economics of climate change usually are based solely on the absolute temperature increase. Hence, these models neglect additional damages that will occur if the rate of temperature increase exceeds a certain threshold that overstrains the adaptive capacities of ecological and social systems. In the present paper, we implement such rate-related damages in the well-known integrated assessment model DICE-2016R. Using the resulting model variant DICE-RD, we show for several scenarios that an insufficient climate policy that ignores rate-related damages can lead to substantial economic losses.