OPTIMAL REDUCTIONS IN CO2 EMISSIONS

Current optimizing climate-economy models use CO2 uptake functions tha t greatly underestimate both peak atmospheric CO2 concentrations and t he time horizon of elevated CO2. As a result these models underestimat e potential global warming damages, Here, a more realistic, but practi cal, carbon cycle parameterization is developed that can be incorporat ed within an optimizing climate-economy model framework, This method i s utilized in conjunction with the DICE model (Nordhaus, 1994) to esti mate optimal reductions in CO2 emissions. The results are shown to be extremely sensitive to the pure rate of time preference, rho. For rho= 3% (Nordhaus' preferred value), our model predicts an optimal CO2 emis sion reduction of 13% by the year 2045, as compared to 11% in the orig inal DICE model, But, for rho=0% the optimal emissions reduction rises to 79% in the year 2045 and to 97% by the year 2200, We argue that en ergy policy should be guided by the rho=0% results for both economic a nd ethical reasons, A steady-state analysis performed using the DICE m odel supports the argument that large fractional reductions in CO2 emi ssions should be undertaken. (C) 1997 Elsevier Science Ltd.