AN OVERLAPPING GENERATIONS MODEL OF CLIMATE-ECONOMY INTERACTIONS

A numerically calibrated overlapping generations model of climate chan ge and the world economy is examined in this paper. In the absence of intergenerational transfers, efficient rates of greenhouse gas emissio ns abatement rise from 16% in the present to 25% in the long run, whil e mean global temperature increases by 7.4 degrees C relative to the p reindustrial norm. A utilitarian optimum, which attaches equal weight to each generation's life-cycle utility, yields abatement rates that r ise from 48% to 89%, with a long-run temperature increase of 3.4 degre es C. A second-best utilitarian path, in which intergenerational trans fers are by assumption institutionally infeasible, also supports strin gent abatement measures.