Stochastic Integrated Assessment of Ecosystem Tipping Risk

One of the major potential consequences of climate change is damage to earth’s ecosystems, damage which could manifest itself in the form of tipping risks. We establish an economic growth model of ecosystem tipping risks, set in the context of possible forest dieback. We consider different specifications of impacts arising from the forest dieback tipping point, specifications such as changes in the system dynamics of the forests, changes in the forest mass, and impacts on economic output. We also consider endogenous and exogenous tipping point probabilities. For each specification we compute the optimal policies for forest management and emission control. Our results show qualitative differences in patterns of post-tipping event, optimal forest harvest, and either precautionary or aggressive pre-tipping event harvest patterns, a feature consistent with the findings of the existing literature. Optimal control of deforestation and carbon dioxide emission reduction also exhibits varied patterns of post- and pre-tipping levels depending on the nature of the tipping risk. Still, today’s optimal policy is one of more stringent emissions control in presence of a potential forest dieback tipping point.