Uncertainty in the Economics of Climate Change: Can Global Sensitivity Analysis be of Help?

Integrated assessment models offer a crucial support to decisionmakers in climate policy making. For a full understanding and corroboration of model results, analysts ought to iden- tify the exogenous variables that influence the model results the most (key drivers), appraise the relevance of interactions, and the direction of change associated with the simultaneous variation of uncertain variables. We show that such information can be directly extracted from the data set produced by Monte Carlo simulations. Our discussion is guided by the ap- plication to the well-known DICE model of William Nordhaus. The proposed methodology allows analysts to draw robust insights into the dependence of future atmospheric tempera- ture, global emissions, and carbon costs and taxes on the model’s exogenous variables.