Jon Goldstein Memorial Lecture
Climate (and Other) Catastrophes
Bank of Tokyo-Mitsubishi Ltd Professor in Finance and Economics, MIT Sloan School of Management
How great is the risk of a climate catastrophe, and what should we do about it? The likelihood and possible impact of a catastrophic climate outcome is what drives the social cost of carbon, and thus the case for a stringent climate policy. But what is that likelihood, and what kinds of outcomes might occur? Might the impact of a catastrophic climate outcome be limited to a sharp reduction in GDP and consumption (as most climate models assume), or might the impact also include the deaths of large numbers of people? The answers to these questions are necessarily speculative, but we must address them. To complicate matters, there are other potential catastrophes that we must also worry about, such as nuclear or bioterrorism, or the spread of a “mega-virus.” What are the policy implications of these threats, and how we might respond to the risk of climate – and other – catastrophes?