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Endogenous growth, convexity of damages and climate risk: how Nordhaus� framework supports deep cuts in carbon emissions

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  • Simon Dietz
  • Nicholas Stern

Abstract

To slow or not to slow� (Nordhaus, 1991) was the first economic appraisal of greenhouse gas emissions abatement and founded a large literature on a topic of great, worldwide importance. In this paper we offer our assessment of the original article and trace its legacy, in particular Nordhaus� later series of �DICE� models. From this work many have drawn the conclusion that an efficient global emissions abatement policy comprises modest and modestly increasing controls. On the contrary, we use DICE itself to provide an initial illustration that, if the analysis is extended to take more strongly into account three essential elements of the climate problem � the endogeneity of growth, the convexity of damages, and climate risk � optimal policy comprises strong controls. To focus on these features and facilitate comparison with Nordhaus� work, all of the analysis is conducted with a high pure-time discount rate, notwithstanding its problematic ethical foundations.

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  • Simon Dietz & Nicholas Stern, 2014. "Endogenous growth, convexity of damages and climate risk: how Nordhaus� framework supports deep cuts in carbon emissions," GRI Working Papers 159, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp159
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    Cited by:

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    2. Chambers, Robert G. & Melkonyan, Tigran, 2017. "Ambiguity, reasoned determination, and climate-change policy," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 74-92.
    3. Patrick Troy, 2014. "Climate change response: Linking research, policy and action," The Economic and Labour Relations Review, , vol. 25(4), pages 619-628, December.
    4. Kahn, Matthew E., 2015. "Climate Change Adaptation: Lessons from Urban Economics," Strategic Behavior and the Environment, now publishers, vol. 5(1), pages 1-30, June.
    5. Hanna Yatsenko, 2020. "The Impact of Weather Conditions on Economic Activity in Ukraine," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 249, pages 25-49.
    6. Jaime DE MELO, 2016. "Moving on Towards a Workable Climate Regime," Working Papers P171, FERDI.
    7. Paul I. Ojeaga & Sunday M. Posu, 2017. "Climate Change, Industrial Activity and Economic Growth: A Cross Regional Analysis," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 5(2), pages 7-17, December.
    8. Auke Hoekstra & Maarten Steinbuch & Geert Verbong, 2017. "Creating Agent-Based Energy Transition Management Models That Can Uncover Profitable Pathways to Climate Change Mitigation," Complexity, Hindawi, vol. 2017, pages 1-23, December.
    9. Anil Markandya, 2017. "State of Knowledge on Climate Change, Water, and Economics," World Bank Publications - Reports 26491, The World Bank Group.
    10. Rick Van der Ploeg & Armon Rezai, 2015. "Intergenerational Inequality Aversion, Growth and the Role of Damages: Occam's rule for the global tax," Economics Series Working Papers OxCarre Research Paper 15, University of Oxford, Department of Economics.
    11. Armon Rezai & Frederick Ploeg, 2017. "Second-Best Renewable Subsidies to De-carbonize the Economy: Commitment and the Green Paradox," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 409-434, March.
    12. Song, Edward, 2015. "Equilibrium to Equilibrium Dynamics in a Climate Change Economy," MPRA Paper 72435, University Library of Munich, Germany.
    13. Armon Rezai & Frederick Van der Ploeg, 2016. "Intergenerational Inequality Aversion, Growth, and the Role of Damages: Occam's Rule for the Global Carbon Tax," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(2), pages 493-522.
    14. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    15. Philip Kofi Adom, 2024. "The Socioeconomic Impact of Climate Change in Developing Countries in the Next Decades," Working Papers 681, Center for Global Development.
    16. Becken, Susanne & Carmignani, Fabrizio, 2020. "Are the current expectations for growing air travel demand realistic?," Annals of Tourism Research, Elsevier, vol. 80(C).

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