OPTIMAL CARBON EMISSIONS TRAJECTORIES WHEN DAMAGES DEPEND ON THE RATEOR LEVEL OF GLOBAL WARMING

In this paper we extend our earlier work with the Carbon Emissions Tra jectory Assessment model (CETA) to consider a number of issues relatin g to the nature of optimal carbon emissions trajectories. We first exp lore model results when warming costs are associated with the rate of temperature rise, rather than with its level, as in our earlier work. We find that optimal trajectories are more strongly affected by the de gree of non-linearity in the warming cost function than by whether the cost function is driven by the warming level or the warming rate. Nex t we briefly explore the implications of simple uncertainty and risk a version for optimal emissions trajectories. We find that uncertainty a nd risk aversion cause optimal emissions trajectories to be somewhat l ower, but that the effect is not noticeable in the near term and not d ramatic in the long term; the long term effect on the shadow price of carbon is more marked, however. Finally, we experiment with scaling up the warming cost functions until optimal policies are approximately t he same as a policy of stabilizing emissions at the 1990 level. Based on the results of this experiment, we conclude that damages would have to be very high to justify anything like a stabilization policy; and even in this case, a policy allowing intertemporal variation in emissi ons would be better.