Bloomberg: "Nobel Winner Nordhaus Broke New Ground Fusing Economics and Climate"
by Eric Roston
It was in 1992 that he introduced what became the central tool of climate-economic analysis, the Dynamic Integrated Climate-Economy model. Known as DICE, the model quickly became the default tool for understanding the dynamics between economic growth and pollution, warming impacts and policy choices.
“It is the gold standard” for analysis even today, said Gernot Wagner, a climate economist at Columbia Business School.
DICE brings together into one place vastly different fields of expertise, each written into the model’s interacting parts: Economic growth causes greenhouse gas pollution, which comes mostly from burning fossil fossils for energy, agriculture and industry. Those emissions lead to increased levels of global carbon dioxide that traps extra heat in the atmosphere. The heat increases temperatures, raises sea levels and triggers other impacts. All of these have economic effects that feed back, with policy, into economic growth and emissions.
The model has always been open and adaptable. The foundational DICE papers have drawn thousands of citations in subsequent economics research, as others tested his methods and discovered improvements.
The most persistent criticism of DICE is that it made flawed assumptions about the relationship between pollution and damage. Climate economists often measure damage in terms of the present cost of future losses, per metric ton of emitted carbon dioxide. The original 1992 DICE model estimated roughly $5 to $6 a ton in today’s dollars, according to Wagner. That’s about one-tenth of what the latest version of DICE puts it at.
Many independent estimates soar higher still. Wagner and several colleagues in 2024 collected 1,823 estimates of the social cost of carbon from 147 studies. Their analysis of 20 years of work settled on an overall average figure of $283 per ton.
DICE simplifies matters, which is both its greatest asset and Achilles’ heel. “Everyone in environmental economics has studied the model and then has concluded to themselves that there are bits missing,” Wagner said. The critics within the discipline often made improvements, he said, “which is of course why his model is so prominent.”
