Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108508
Authors: 
Hambel, Christoph
Kraft, Holger
Schwartz, Eduardo S.
Year of Publication: 
2015
Series/Report no.: 
SAFE Working Paper Series 92
Abstract: 
This paper studies a dynamic stochastic general equilibrium model involving climate change. Our model allows for damages on economic growth resulting from global warming. In the calibration, we capture effects from climate change and feedback effects on the temperature dynamics. We solve for the optimal state-dependent abatement policy. In our simulations, the costs of this policy measured in terms of lost GDP growth are moderate. On the other hand, postponing abatement action could reduce the probability that the climate can be stabilized. For instance, waiting for 10 years reduces this probability from 60% to 30%. Waiting for another 10 years leads to a probability that is less than 10%. Finally, doing nothing opens the risk that temperatures might explode and economic growth decreases significantly.
Subjects: 
Climate change economics
Carbon abatement
GDP growth
JEL: 
D81
Q5
Q54
Document Type: 
Working Paper

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