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

Dietz, Simon and Stern, Nicholas (2014) Endogenous growth, convexity of damages and climate risk: how Nordhaus’ framework supports deep cuts in carbon emissions. The Economic Journal . ISSN 1468-0297 (In Press)

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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 effi�cient 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.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information: © 2014 Royal Economic Society
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
Journal of Economic Literature Classification System: Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Sets: Departments > Geography and Environment
Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Research centres and groups > Centre for Climate Change Economics and Policy (CCCEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 29 Jul 2014 10:49
URL: http://eprints.lse.ac.uk/58406/

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