Felix D. Meier (German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig; University Leipzig)
The paper analyzes geoengineering and strategic interactions in an integrated assessment model (IAM) of climate change. For this purpose, we (i) derive a new class of solutions to analytic IAMs that allows us to (ii) solve an integrated assessment model with sulfur-based geoengineering in closed form, and (iii) to model realistic strategic interactions between regions. The paper builds on the analytic climate economy (ACE) model by Traeger (2018). In our extension, temperatures respond to carbon dioxide (standard carbon cycle), sulfur injections into the stratosphere (fitted to scientific data), and a potential counter-geoengineering agent that can offset some of the sulfur-based cooling. Damages arise from the increase in temperatures, the chemical agent(s) employed for (counter-) geoengineering, and ocean acidification. We show analytically and quantitatively how a global social planner chooses the optimal deployment of sulfur and how geoengineering affects the social cost of carbon. Our dynamic game involves two players who are partially affected by the other region's (counter-) geoengeneering measures. The model gives rise to a large range of mutually exclusive Nash equilibria that relate to the ideas of free-riding, free-driving, climate clash, and ”climate match”. For each type of equilibrium we provide an analytical formula for the regional social cost of carbon.
Felix D. Meier (German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig; University Leipzig) — Christian Traeger (Oslo University; Frisch Centre, Oslo; ifo institute)