Energy Balance Climate Models, Damage Reservoirs and the Time Profile of Climate Change Policy

31 Pages Posted: 16 Apr 2012

See all articles by William A. Brock

William A. Brock

University of Wisconsin, Madison - Department of Economics; University of Missouri at Columbia - Department of Economics

Gustav Engstrom

The Beijer Institute of Ecological Economics

Anastasios Xepapadeas

Athens University of Economics and Business; University of Bologna - School of Economics, Management, and Statistics

Date Written: April 16, 2012

Abstract

A simplified energy balance climate model is considered with the global mean temperature as the state variable, and an endogenous ice line. The movements of the ice line towards the Poles are associated with damage reservoirs where initial damages are high and then eventually vanish as the ice caps vanish and the damage reservoir is exhausted. We couple this climate model with a simple economic growth model and we show that the endogenous ice line induces a nonlinearity. This nonlinearity when combined with two sources of damages - the conventional damages due to temperature increase and the reservoir damages - generates multiple steady states and Skiba points. It is shown that the policy ramp implied by this model calls for high mitigation now. Simulation results suggest that the policy ramp could be U-shaped instead of the monotonically increasing with low starting mitigation gradualist policy ramp.

Keywords: energy balance climate models, damage reservoir, ice line, permafrost, heat diffusion, policy ramp, skiba points

JEL Classification: Q54, Q58

Suggested Citation

Brock, William A. and Engstrom, Gustav and Xepapadeas, Anastasios, Energy Balance Climate Models, Damage Reservoirs and the Time Profile of Climate Change Policy (April 16, 2012). FEEM Working Paper No. 20.2012, Available at SSRN: https://ssrn.com/abstract=2040674 or http://dx.doi.org/10.2139/ssrn.2040674

William A. Brock

University of Wisconsin, Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-263-6655 (Phone)
608-263-3876 (Fax)

University of Missouri at Columbia - Department of Economics ( email )

118 Professional Building
Columbia, MO 65211
United States

Gustav Engstrom

The Beijer Institute of Ecological Economics ( email )

Stockholm, SE-104 05
Sweden

Anastasios Xepapadeas (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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