Endogenous Growth, Convexity of Damage and Climate Risk: How Nordhaus' Framework Supports Deep Cuts in Carbon Emissions

47 Pages Posted: 31 Mar 2015

See all articles by Simon Dietz

Simon Dietz

London School of Economics - Grantham Research Institute on Climate Change and the Environment and Department of Geography and Environment

Nicholas Stern

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment

Date Written: March 2015

Abstract

‘To slow or not to slow’ (Nordhaus, 1991) was the first economic appraisal of greenhouse gas emissions abatement and founded a large literature on a topic of worldwide importance. We offer our assessment of the original article and trace its legacy, in particular Nordhaus's later series of ‘DICE’ models. From this work, many have drawn the conclusion that an efficient global emissions abatement policy comprises modest and modestly increasing controls. We use DICE itself to provide an initial illustration that, if the analysis is extended to take more strongly into account three essential elements of the climate problem – the endogeneity of growth, the convexity of damage and climate risk – optimal policy comprises strong controls. Nordhaus, W.D. (1991). ‘To slow or not to slow: the economics of the greenhouse effect’, Economic Journal, vol. 101(407), pp. 920–37.

Suggested Citation

Dietz, Simon and Stern, Nicholas, Endogenous Growth, Convexity of Damage and Climate Risk: How Nordhaus' Framework Supports Deep Cuts in Carbon Emissions (March 2015). The Economic Journal, Vol. 125, Issue 583, pp. 574-620, 2015, Available at SSRN: https://ssrn.com/abstract=2587451 or http://dx.doi.org/10.1111/ecoj.12188

Simon Dietz (Contact Author)

London School of Economics - Grantham Research Institute on Climate Change and the Environment and Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://personal.lse.ac.uk/dietzs

Nicholas Stern

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment ( email )

Houghton Street
London, WC2A 2AE
Great Britain

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