Econometric analysis of global climate change

This paper reports on research that applies econometric time series methods to the analysis of global climate change. The aim of this research was to test hypotheses concerning the causes of the historically observed rise in global temperatures. Longer term applications include quantification of the contribution of different forcing variables to historic warming and use of the model as a module in integrated assessment. Research to date has comprised three stages. In the first stage we used the concept of Granger causality and differences between the temperature record in the northern and southern hemispheres to investigate the causes of temperature increase. In the second stage we tested various global change time series for the presence of stochastic trends. We found that most series contain a stochastic trend with the greenhouse gas series containing I(2) stochastic trends. In the third stage we developed a structural time series to investigate some of the hypotheses suggested by the earlier stages and further tested for the presence of an I(2) trend in hemispheric temperature series. We found that the two temperature series share a common I(2) stochastic trend that may have its source in radiative forcing due to greenhouse gases. There is a second non-stationary component that appears only in the northern hemisphere and appears to be related to radiative forcing due to anthropogenic sulphur emissions.