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Growth and Climate Change: Threshold and Multiple Equilibria

In: Dynamic Systems, Economic Growth, and the Environment

Author

Listed:
  • Alfred Greiner

    (Bielefeld University)

  • Lars Grüne

    (University of Bayreuth)

  • Willi Semmler

    (New School)

Abstract

In this paper we analyze a basic growth model where we allow for global warming. As concerns global warming we assume that the climate system is characterized by feedback effects such that the ability of the earth to emit radiation to space is reduced as the global surface temperature rises. We first study the model assuming that abatement spending is fixed exogenously and demonstrate with the use of numerical examples that the augmented model may give rise to multiple equilibria and thresholds. Then, we analyze the social optimum where both consumption and abatement are set optimally and show that the long-run equilibrium is unique in this case. In the context of our model with multiple equilibria initial conditions are more important for policy actions than discount rates. Our analysis thus supports the view that policy actions against global warming are urgently needed.

Suggested Citation

  • Alfred Greiner & Lars Grüne & Willi Semmler, 2010. "Growth and Climate Change: Threshold and Multiple Equilibria," Dynamic Modeling and Econometrics in Economics and Finance, in: Jesús Crespo Cuaresma & Tapio Palokangas & Alexander Tarasyev (ed.), Dynamic Systems, Economic Growth, and the Environment, pages 63-78, Springer.
    • Handle: RePEc:spr:dymchp:978-3-642-02132-9_4
    DOI: 10.1007/978-3-642-02132-9_4
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