He has also written several books on global warming and climate change, one of his primary areas of research. Those books include Managing the Global Commons: The Economics of Climate Change (1994), which won the 2006 Award for "Publication of Enduring Quality" from the Association of Environmental and Resource Economics. Another book, with Joseph Boyer, is Warming the World: Economic Models of Global Warming (2000). His most recent book is The Climate Casino: Risk, Uncertainty, and Economics for a Warming World.
In 1972 Nordhaus, along with fellow Yale economics professor James Tobin, published Is Growth Obsolete?, an article that introduced the Measure of Economic Welfare (Index of Sustainable Economic Welfare) as the first model for economic sustainability assessment.
Nordhaus has written on the economics of climate change. He is the developer of the DICE and RICE models, integrated assessment models of the interplay between economics, energy use, and climate change.
A Question of Balance: Weighing the Options on Global Warming Policies ISBN 978-0-300-13748-4 was published by Yale University Press on June 24, 2008.
In Reflections on the Economics of Climate Change (1993), he states: "Mankind is playing dice with the natural environment through a multitude of interventions – injecting into the atmosphere trace gases like the greenhouse gases or ozone-depleting chemicals, engineering massive land-use changes such as deforestation, depleting multitudes of species in their natural habitats even while creating transgenic ones in the laboratory, and accumulating sufficient nuclear weapons to destroy human civilizations."
Under the climate change models he has developed, in general those sectors of the economy that depend heavily on unmanaged ecosystems – that is, are heavily dependent upon naturally occurring rainfall, runoff, or temperatures – will be most sensitive to climate change. Agriculture, forestry, outdoor recreation, and coastal activities fall in this category." Nordhaus takes seriously the potentially catastrophic impacts of climate change.
In 2007, Nordhaus, who has done several studies on the economics of global warming, criticized the Stern Review for its use of a low discount rate:
The Reviewʼs unambiguous conclusions about the need for extreme immediate action will not survive the substitution of discounting assumptions that are consistent with todayʼs market place. So the central questions about global-warming policy – how much, how fast, and how costly – remain open. The Review informs but does not answer these fundamental questions.
In 2013, Nordhaus chaired a committee of the National Research Council that produced a report discounting the impact of fossil fuel subsidies on greenhouse gas emissions.
However, in a December 2016 discussion paper for the Cowles Foundation, his research using the updated DICE model "...confirms past estimates of likely rapid climate change over the next century if there are not major climate-change policies. It suggests that it will be extremely difficult to achieve the 2°C target of international agreements even if ambitious policies are introduced in the near term. The required carbon price needed to achieve current targets has risen over time as policies have been delayed."
In a January 2020 interview with Neue Zürcher Zeitung, Nordhaus claimed that achieving the 2°C goal of the Paris agreement was "impossible", stating that "even if we make the fastest possible turn towards zero emissions, CO2 will continue to accumulate in the atmosphere, because we cannot simply shut down our economy". He asserted that he was not alone in making this assessment, claiming that half of the simulation arrived at the same conclusion. He also remarked that the two-degree target was set without asking about the cost of meeting it.