Growth and climate change: threshold and multiple equilibria

A. Greiner, L. Grüne,W. Semmler: Growth and climate change: threshold and multiple equilibria
in: Dynamic Systems, Economic Growth, and the Environment, J. Crespo Cuaresma, T. P. Palokangas, A. Tarasyev (eds.)
Springer Verlag, 2010, 63 - 79

DOI: 10.1007/978-3-642-02132-9_4
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In this paper we analyze a basic growth model where we allow for global warming. As concerns global warming we assume that the climate system is characterized by feedback effects such that the ability of the earth to emit radiation to space is reduced as the global surface temperature rises. We first study the model assuming that abatement spending is fixed exogeneously and demonstrate with the use of numerical examples that the augmented model may give rise to multiple equilibria and thresholds. Then, we analyze the social optimum where both consumption and abatement are set optimally and show that the long-run equilibrium is unique in this case. In the context of our model with multiple equilibria initial conditions are more important for policy actions than discount rates.

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