No News is Good News in Climate Change?

The economic costs of climate change can be large, or perhaps non-existent. We cannot tell before experiencing climate change, and thus the social cost of carbon is partly based on subjective beliefs. We take a dataset of estimates for the carbon price as a representation of beliefs, and develop a tractable stochastic climate-economy model that replicates the distribution of estimates. We use the model to evaluate the sensitivity of the carbon price path to the lack of climate impact information. Even if the climate experiment progresses without impacts for the coming century, the carbon price exhibits a striking increase: the climate experiment is informative only slowly, while the global economy and thus the scale of potential losses grows relatively fast, making the ”climate policy ramp” robust to significant delays of hard evidence on impacts. (JEL classification: H43; H41; D61; D91; Q54; E21.