The Zero discounting and maximin optimal paths in a simple model of global warming
AbstractFollowing Stollery , we extend the Solow, Dasgupta-Heal model to analyze the effects of global warning. The rise of temperature is caused by the use of fossil resources so that the temperature level can be linked to the remaining stock of these resources. The rise of temperature affects both productivity and utility. We characterize optimal solutions for the maximin and zero-discounting cases and present closed form solutions for the case where the production function and utility function are Cobb-Douglas, and the temperature level is an exponential function of the remaining stock of resources. We show that a greater weight of temperature in the preferences or a larger intertemporal elasticity of substitution both lead to postpone resource use.
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Date of creation: Feb 2009
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Maximin ; zero discounting ; global warming;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-02 (All new papers)
- NEP-ENE-2009-08-02 (Energy Economics)
- NEP-ENV-2009-08-02 (Environmental Economics)
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