Climate Policy under Uncertainty: a Case for Solar Geoengineering∗

Solar Radiation Management (SRM) has two characteristics that make it an attractive means for managing climate risk: it is quick and it is cheap. SRM cannot, however, exactly offset CO2-driven climate change, and its use introduces novel climate and environmental risks. We introduce SRM in a simple economic model of climate change that is designed to explore the interaction between uncertainty in both the climates response to CO2 and the risks of SRM. We find that the fact that SRM can be implemented quickly makes it a valuable tool to manage climate risks, even if it is relatively ineffective at compensating for CO2-driven climate change or if its costs are large compared to traditional abatement strategies. Uncertainty about SRM is high, and decision makers must decide whether or not to commit to research that might reduce this uncertainty. We find that even modest reductions in uncertainty about the side-effects of SRM can reduce the overall costs of climate change in the order of 10%. Juan Moreno-Cruz Georgia Institute of Technology School of Economics, 221 Bobby Dodd Way, Atlanta, GA 30332–0615 [email protected] Davdi W. Keith Harvard University Pierce Hall, 29 Oxford Street, Cambridge, MA 02138 david [email protected] Climate Policy under Uncertainty A Case for Solar Geoengineering ∗ Juan Moreno-Cruz† David W. Keith‡ July 24, 2011