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Energy Balance Climate Models, Damage Reservoirs and the Time Profile of Climate Change Policy

Author

Listed:
  • William Brock

    (University of Wisconsin, Department of Economics)

  • Gustav Engstrom

    (Beijer Institute of Ecological Economics)

  • Anastasios Xepapadeas

    (Athens University of Economics and Business)

Abstract

A simplified energy balance climate model is considered with the global mean temperature as the state variable, and an endogenous ice line. The movements of the ice line towards the Poles are associated with damage reservoirs where initial damages are high and then eventually vanish as the ice caps vanish and the damage reservoir is exhausted. We couple this climate model with a simple economic growth model and we show that the endogenous ice line induces a nonlinearity. This nonlinearity when combined with two sources of damages - the conventional damages due to temperature increase and the reservoir damages - generates multiple steady states and Skiba points. It is shown that the policy ramp implied by this model calls for high mitigation now. Simulation results suggest that the policy ramp could be U-shaped instead of the monotonically increasing with low starting mitigation gradualist policy ramp.

Suggested Citation

  • William Brock & Gustav Engstrom & Anastasios Xepapadeas, 2012. "Energy Balance Climate Models, Damage Reservoirs and the Time Profile of Climate Change Policy," Working Papers 2012.20, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2012.20
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    References listed on IDEAS

    as
    1. Lempert, Robert J. & Sanstad, Alan H. & Schlesinger, Michael E., 2006. "Multiple equilibria in a stochastic implementation of DICE with abrupt climate change," Energy Economics, Elsevier, vol. 28(5-6), pages 677-689, November.
    2. Dieter Grass & Jonathan P. Caulkins & Gustav Feichtinger & Gernot Tragler & Doris A. Behrens, 2008. "Optimal Control of Nonlinear Processes," Springer Books, Springer, number 978-3-540-77647-5, December.
    3. Elizabeth Stanton, 2011. "Negishi welfare weights in integrated assessment models: the mathematics of global inequality," Climatic Change, Springer, vol. 107(3), pages 417-432, August.
    4. William Brock & Gustav Engstrom & Anastasios Xepapadeas, 2012. "Energy Balance Climate Models and the Spatial Structure of Optimal Mitigation Policies," Working Papers 2012.05, Fondazione Eni Enrico Mattei.
    5. Naevdal, Eric, 2006. "Dynamic optimisation in the presence of threshold effects when the location of the threshold is uncertain - with an application to a possible disintegration of the Western Antarctic Ice Sheet," Journal of Economic Dynamics and Control, Elsevier, vol. 30(7), pages 1131-1158, July.
    6. Keller, Klaus & Bolker, Benjamin M. & Bradford, D.F.David F., 2004. "Uncertain climate thresholds and optimal economic growth," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 723-741, July.
    7. Xepapadeas, Anastasios, 2005. "Economic growth and the environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 23, pages 1219-1271, Elsevier.
    8. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, April.
    9. K. G. Mäler & J. R. Vincent (ed.), 2005. "Handbook of Environmental Economics," Handbook of Environmental Economics, Elsevier, edition 1, volume 3, number 3.
    10. W.A. Brock & D. Starrett, 2003. "Managing Systems with Non-convex Positive Feedback," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(4), pages 575-602, December.
    11. Alfred Greiner, Lars Grüne, Willi Semmler, 2009. "WP 2009-7 Growth and Climate Change: Threshold and Multiple Equilibria," SCEPA working paper series. 2009-7, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
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    Cited by:

    1. Desmet, Klaus & Rossi-Hansberg, Esteban, 2015. "On the spatial economic impact of global warming," Journal of Urban Economics, Elsevier, vol. 88(C), pages 16-37.
    2. David Comerford, 2013. "A balance of questions: what can we ask of climate change economics?," Edinburgh School of Economics Discussion Paper Series 216, Edinburgh School of Economics, University of Edinburgh.
    3. Brock, William & Engström, Gustav & Xepapadeas, Anastasios, 2014. "Spatial climate-economic models in the design of optimal climate policies across locations," European Economic Review, Elsevier, vol. 69(C), pages 78-103.

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    More about this item

    Keywords

    Energy Balance Climate Models; Damage Reservoir; Ice Line; Permafrost; Heat Diffusion; Policy Ramp; Skiba Points;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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