Comment

Abstract

Barnett, Brock, and Hansen build a theoretical and quantitative framework to incorporate concepts of uncertainty and ambiguity aversion to climate policy modeling. Their primary focus is on building a tractable dynamic model that includes uncertainty about carbon dynamics, temperature dynamics, and damage functions in a parsimonious way. Their model features state-of-the-art tools in asset pricing with a continuoustimemodel, emphasizing specific processes of uncertainty, such as regime changes (jump processes) and misspecified Brownian increments. This model extends the authors’ previous work (Barnett, Brock, and Hansen 2020). Climate carbon and temperature dynamics follow scientific inputs that combine various climatemodels (Joos et al. 2013). The static economic game is simple, focused on investment and consumption choices over time. There are no explicit prices. The use of emissions in production, which are costly from a climate-change perspective, largely determines the shadow price of consumption. The paper presented by Barnett et al. is a serious attempt at modeling uncertainty from a mathematical point of view. A comprehensive treatment of uncertainty surrounding climate change, such as the one proposed in this paper, seems warranted. I agree that there are significant uncertainties to be studied, particularly regarding the ability of humanity to adapt and mitigate the change (policy and economic uncertainty) as well as surrounding the possibility of major tipping points (Cai et al. 2015; Lemoine and Traeger 2016). Indeed, the authors find that uncertainty