  To analyze climate change mitigation strategies, economists rely on
simplified climate models - climate emulators. We propose a generic and
transparent calibration and evaluation strategy for these climate emulators
that is based on Coupled Model Intercomparison Project, Phase 5 (CMIP5). We
demonstrate that the appropriate choice of the free model parameters can be of
key relevance for the predicted social cost of carbon. We propose to use four
different test cases: two tests to separately calibrate and evaluate the carbon
cycle and temperature response, a test to quantify the transient climate
response, and a final test to evaluate the performance for scenarios close to
those arising from economic models. We re-calibrate the climate part of the
widely used DICE-2016: the multi-model mean as well as extreme, but still
permissible climate sensitivities and carbon cycle responses. We demonstrate
that the functional form of the climate emulator of the DICE-2016 model is fit
for purpose, despite its simplicity, but its carbon cycle and temperature
equations are miscalibrated. We examine the importance of the calibration for
the social cost of carbon in the context of a partial equilibrium setting where
interest rates are exogenous, as well as the simple general equilibrium setting
from DICE-2016. We find that the model uncertainty from different consistent
calibrations of the climate system can change the social cost of carbon by a
factor of four if one assumes a quadratic damage function. When calibrated to
the multi-model mean, our model predicts similar values for the social cost of
carbon as the original DICE-2016, but with a strongly reduced sensitivity to
the discount rate and about one degree less long-term warming. The social cost
of carbon in DICE-2016 is oversensitive to the discount rate, leading to
extreme comparative statics responses to changes in preferences.
