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An Overlapping Generations Model of Climate‐Economy Interactions
Author(s) -
Howarth Richard B.
Publication year - 1998
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00123
Subject(s) - overlapping generations model , economics , greenhouse gas , climate change , norm (philosophy) , natural resource economics , environmental science , econometrics , microeconomics , ecology , political science , law , biology
A numerically calibrated overlapping generations model of climate change and the world econommy is examined in this paper. In the absence of intergenerational transfers, efficient rates of greenhouse gas emissions abatement rise from 16% in the present to 25% in the long run, while mean global temperature increases by 7.4°C relative to the preindustrial norm. A utilitarian optimum, which attaches equal weight to each generation's life‐cycle utility, yields abatement rates that rise from 48% to 89%, with a long‐run temperature increase of 3.4°C. A second‐best utilitarian path, in which intergenerational transfers are by assumption institutionally infeasible, also supports stringent abatement measures.