Klaus Keller (Pennsylvania State University) Zili Yang (SUNY at Binghamton) Matt Hall (Brookings Institution) David F. Bradford (Princeton University and New York University)
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We analyze carbon dioxide (CO sequestration as a strategy to manage future climate change in an optimal economic growth framework. We approach the problem in two ways: first, by using a simple analytical model, and second, by using a numerical optimization model which allows us to explore the problem in a more realistic setting. CO sequestration is not a perfect substitute for avoiding CO2 production because CO2 leaks back to the atmosphere and hence imposes future costs. The “efficiency factor” of CO2 sequestration can be expressed as the ratio of the avoided emissions to the economically equivalent amount of sequestered CO2 emissions. A simple analytical model in terms of a net-present value criterion suggests that short-term sequestration methods such as afforestation can be somewhat ( 60 %) efficient, while long term sequestration (such as deep aquifer or deep ocean sequestration) can be very ( 90%) efficient. A numerical study indicates that CO2 sequestration methods at a cost within the range of present estimates reduce the economically optimal CO2 concentrations and climate related damages. The potential savings associated with CO2 sequestration is equivalent in our utilitarian model to a one-time investment of several percent of present gross world product.
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Paper provided by Princeton University, Department of Economics, Center for Economic Policy Studies. in its series Working Papers with number
108.