Business-as-Usual and Orbital Debris Path

Computing the so-called Business-as-Usual (BaU) scenario in Integrated Assessment Models (IAMs) that include environmental externalities is a non-trivial task. Traditionally, general equilibrium growth models with such externalities are solved in a centralized framework, where a social planner maximizes welfare by fully internalizing the environmental damage. This is the approach taken in the well-known DICE model by Nordhaus (1992). However, in DICE, the BaU scenario is defined as the social planner solution with zero abatement, even though the externality is already internalized through investment decisions to maximize social welfare. This creates a mismatch when comparing the BaU scenario to the true first-best allocation. This paper solves the DISE-2024 (Dynamic Integrated Space Economy) model in a decentralized economy, using a fixed point method to compute orbital debris trajectories under a laissez-faire setting, and compares them with the first-best optimal trajectories from a centralized economy.