Table 4 Key model assumptions Assumption... | Emerald Publishing

Table 4

Key model assumptions

Assumption	Comments
Gordon's variant model structure	Model assumptions parallel those of Gordon's growth model, namely constant $a_{i, 0}$ ⁠, $r$ and $g$ ⁠. We discuss these and other assumptions below
Constant $a_{i, 0}$	Defined commencing with Eq. (3) with growth assumed via event increased annual probability (or potentially intensity). Thus $D_{E} I η_{i} Ψ_{i}$ assumed constant. Annual liabilities increase by $g$
Constant $g$	Event probabilities are assumed to grow linearly with time based on extrapolation of historical climate data, allowing estimation of growth rate applicable to $a_{i, 0}$ in perpetuity (see main text for discussion of climate feedbacks). Appendix 2 assumes constant $D_{E} I Ψ_{i}$ and negligible changes in $η_{i}$ ⁠. Constant $D_{E} I$ assumes constant event damages in inflation-adjusted terms
Constant $r$	For tractability, our model assumes constant climate discount rate, which also makes damage estimates conservative. Literature also supports declining discount rates and stochastic modelling may be appropriate (see Section 4)
Constant $η_{i}$	We assume that a firm's accumulated emissions, as a proportion of all human emissions, remain constant in perpetuity, making this a “business as usual” estimate. For example, a high-emitting firm ceasing to exist in 50 years' time would have zero (current) emissions after that date. However, if the firm's existence ceased because it was acquired by another organisation, the acquirer would take on those emissions and liabilities
Constant $Ψ_{i}$	We assume a consistent societal position regarding emitters' responsibility (see Section 6.1 for further comments)
FAR	We assume FAR analysis is appropriate for the extreme weather events considered, implying step-change damage functions (see sections 4 and 4.2)
GWP100	While carbon dioxide is the primary greenhouse gas, the climate impact of other gases is assessed using metrics such as GWP100 (Shine et al., 2005). We assume widely accepted metrics, such as GWP100, are appropriate for conversion between different gases' climate impacts
Event probability	We assume EW event damages increase due to increased annual event probability. This neglects increases in event intensity. However, should annual event probabilities exceed unity, we assume that expected annual liabilities continue to grow at the same rate due to increased event intensity, or multiple events annually

Assumption	Comments
Gordon's variant model structure	Model assumptions parallel those of Gordon's growth model, namely constant $a_{i, 0}$ , $r$ and $g$ . We discuss these and other assumptions below
Constant $a_{i, 0}$	Defined commencing with Eq. (3) with growth assumed via event increased annual probability (or potentially intensity). Thus $D_{E} I η_{i} Ψ_{i}$ assumed constant. Annual liabilities increase by $g$
Constant $g$	Event probabilities are assumed to grow linearly with time based on extrapolation of historical climate data, allowing estimation of growth rate applicable to $a_{i, 0}$ in perpetuity (see main text for discussion of climate feedbacks). Appendix 2 assumes constant $D_{E} I Ψ_{i}$ and negligible changes in $η_{i}$ . Constant $D_{E} I$ assumes constant event damages in inflation-adjusted terms
Constant $r$	For tractability, our model assumes constant climate discount rate, which also makes damage estimates conservative. Literature also supports declining discount rates and stochastic modelling may be appropriate (see Section 4)
Constant $η_{i}$	We assume that a firm's accumulated emissions, as a proportion of all human emissions, remain constant in perpetuity, making this a “business as usual” estimate. For example, a high-emitting firm ceasing to exist in 50 years' time would have zero (current) emissions after that date. However, if the firm's existence ceased because it was acquired by another organisation, the acquirer would take on those emissions and liabilities
Constant $Ψ_{i}$	We assume a consistent societal position regarding emitters' responsibility (see Section 6.1 for further comments)
FAR	We assume FAR analysis is appropriate for the extreme weather events considered, implying step-change damage functions (see sections 4 and 4.2)
GWP100	While carbon dioxide is the primary greenhouse gas, the climate impact of other gases is assessed using metrics such as GWP100 (Shine et al., 2005). We assume widely accepted metrics, such as GWP100, are appropriate for conversion between different gases' climate impacts
Event probability	We assume EW event damages increase due to increased annual event probability. This neglects increases in event intensity. However, should annual event probabilities exceed unity, we assume that expected annual liabilities continue to grow at the same rate due to increased event intensity, or multiple events annually

Source(s): The authors