Optimal climate policy under the possibility of a catastrophe

This paper concerns optimal emissions of greenhouse gases when catastrophic consequences are possible. A numerical model is presented, which takes int o account both continuous climate-feedback damages as well as the possibili ty of a catastrophic outcome. The possibility of a climate catastrophe is a major argument for greenhouse gas abatement even in absence of continuous damage. Special attention is given to the subjective probability of a catas trophe and the pure rate of time preferences, and implicit values of these parameters are calculated if an emissions stabilisation target is assumed o ptimal. Finally, the expected value of perfect information about the probab ility of a catastrophe is estimated. (C) 1999 Elsevier Science B.V, All rig hts reserved.